One in four young people has a mental illness at any given time, according to the state's only youth mental health clinic.
Professor Patrick McGorry, executive director of Orygen Youth Health - Victoria's only dedicated youth mental health organisation - said young people between 15 and 25 were susceptible to mental illness, with late adolescence and early adulthood a peak time for diagnosis.
Professor McGorry said young people suffered ailments ranging from depression, anxiety, bi-polar disorder, substance abuse and psychosis, particularly schizophrenia. A draft document from Orygen revealed that 27 per cent of young adults between 18 and 24 have one or more mental disorders.
The rate of mental illness in young adults is almost double that in children.
With 22 per cent of the state's population between 15 and 25, Professor McGorry said the trend was worrying. He said that since WWII there had been a substantial increase in psychosocial disorders affecting young people.
The increase in juvenile crime, alcohol and illicit drug use and the increase in depressive disorders and a sharp increase in suicidal and self-harming behaviours were all factors in mental illness.
The draft report also highlighted that while child psychiatry services were under- resourced, mental health services for older adolescents and young adults did not exist or were in very early stages of development.
In Victoria's mental health system, young people diagnosed with acute mental illness are transferred to the adult system at age 18.
Professor McGorry said although some bridging methods had been adopted to treat patients between the child and adult services, more needed to be done to highlight the negative effects that the early onset of mental illness had on a young person's life.
John Moran, Orygen's director of systems and operations, said the early diagnosis of mental illness could alleviate problems faced later on in life.
Because adolescence was a period of change, mental illness could have disastrous effects of family and peer networks while also hampering sufferers' education and vocational pursuits, he said.
By 2020, the World Health Organisation has predicted that depression will be the second leading cause of disease burden worldwide after heart disease, with young people making up a a substantial proportion of sufferers.