Wallace believes the structure leading into the AFL is superior in Western Australia and South Australia than Victoria - giving youngsters in those states the opportunity of playing senior football far earlier and also giving them more opportunity of being chosen as rookie list players if they miss out on being drafted.
And that, combined with the fact the wealthy non-Victorian clubs are generally able to afford more rookie list players than their cash-strapped Victorian counterparts, means far more opportunities for those players to be snapped up by the likes of Adelaide and West Coast.
Wallace's comments come at a time when four non-Victorian clubs could fill the top four positions on the ladder at the end of the home and away season for the first time.
"I don’t think the Victorian system is right," Wallace said on Tuesday.
"There are some real flaws in our system compared to the interstate system."
"I think Victorian kids are disadvantaged in the way the system is structured at the moment."
AFL spokesman Patrick Keane said the league was currently doing a review of second tier competitions across Australia "to consider the different pathways and opportunities that are available."
But Keane admitted the non-Victorian clubs did have an advantage when it came to the rookie list.
"Victorian clubs have all not fully utilised their rookie lists recently based on cost, and rookie lists have proven a good secondary development opportunity (of AFL players)."
Wallace said Western Australian and South Australian youngsters had an advantage under the current system because they were aligned to a senior club in either the WAFL or SANFL while Victorian youngsters instead played in an under 18 competition.
"In Western Australia and South Australia it is more simple, and I still don’t believe our system works correctly in Victoria."
Wallace said, for example, a talented 16-year-old in Western Australia was tied to a WAFL club like East Fremantle and if good enough could step straight into the senior team before being drafted, and was then more prepared for the AFL.
But the major pathway into the AFL for a 16-year-old in Victoria was to play for an under 18 club in the TAC Cup, robbing him of senior experience.
However Wallace said the biggest differences between the two set-ups came for those players not drafted at 18.
"When kids miss out on being drafted, the kid at East Fremantle is bitterly disappointed but he still has a home," he said.
"But the kid that say comes out of the Sandringham Dragons (one of the Victorian under 18 clubs) - where is his home?
"He has to go to a VFL club or play local footy and the kids he has played with for the last three or four years are scattered all over the place."
This is reflected in current AFL stats which show that of all the graduates from the TAC Cup, just 17 per cent go to AFL clubs while 38 per cent go to the VFL and 34 per cent return to their original junior club with the rest going to another club either in Victoria or interstate.
Wallace said the WA and SA system was better in terms of retaining players who aren't drafted at 18.
"And straight off that is an advantage to the interstate boys when we (AFL clubs) are looking at re-drafting them (through the rookie list)."
While Wallace says such players are available to all clubs, they were more likely to go to say the Crows or the Eagles.
Adelaide and West Coast, which are three games clear on top with three rounds remaining, have found several stars through their rookie list including Nathan Bock, Martin Mattner, Ben Rutten and Michael Doughty for the Crows and Chad Fletcher and Dean Cox for the Eagles.
"You look at the success of the interstate teams where they have a bigger backyard (of potential AFL players) to themselves," Wallace said.
"I mean they are available to anyone else, but they have a more intimate knowledge of their own and we have seen what Adelaide and West Coast have been able to do with their rookies."
And as Wallace pointed out, Adelaide and West Coast are always able to afford a full complement of rookies whereas the Western Bulldogs can afford just one.
"We (the Victorian clubs) haven't got the depth of rookies and as many as the interstate clubs have got."
"And if you haven't got them what you are doing is basically restricting the depth on your list."
