Waugh, however, feels India, Australia and England are closest to getting the equilibrium right.
Worried about the impact that Twenty20 cricket is having on the game, Waugh said the incentive on offer in T20 leagues has led to a decline in loyalty towards national duty.
"I think Australia is the closest when it comes to striking a balance, India has the potential and England is also coming up nicely...I think it's impossible to strike a perfect balance given that there are three different teams. It's not realistic. I don't think there would ever be one world no.1 in all three formats of the game," Waugh said in an interaction with the Indian media at the Laureus World Sports Awards here.
His sentiments were echoed by former England captain Ian Botham, who said Twenty20 should be kept at the "bottom of the shelf".
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"Test cricket is number one because it ebbs and flows beautifully but there is shelf life for every format. And I feel Twenty20 should be at the bottom of the shelf. People are saying it was a great World Twenty20 final last month. I say it was a great last four balls, the rest of the final was a drag. I think it was a pretty poor final," Botham said.
"That's a real threat. T20 could become a lottery because cricket is much more than just 20 overs. Crowds like it but then crowds like Test cricket too. In England every big Test series is sold out, it's the same in Australia, South Africa or New Zealand" he said.
"I think players have to remind people of how important Test cricket is. Players have the obligation to look after Test cricket," Botham added.
Waugh said West Indies is a prime example of how T20 can affect the growth of other formats.
Talking of Australia, Waugh said Steven Smith's men deserved their early ouster from last month's World T20.
"I appreciate that we put Test cricket at a pedestal and because of that probably T20 has suffered but I respect Cricket Australia for giving primacy to Test cricket. As a result we didn't have a settled line-up in World T20 and we got what we deserved. I guess there will be a shakeup and we will pay T20s a bit more respect," he said.
"I am concerned about what might happen to ODIs. It's a format I like because it also ebbs and flows like Tests. There is a need to get that balance but I don't think it's going to be easy," he said.