The 168-Test veteran and their most successful captain did not go so far as to say that England would beat Australia for the first time since 1987 - when Waugh was starting out on his Test career - but he admitted after a 3-0 whitewash of the West Indies in the Caribbean under their belts they had become a real force.
"There is no reason why they can't do well next year," Waugh told BBC radio.
"They're a very good side, they're gelling together nicely under a new captain and anything's possible.
"It only takes one guy to put on a great performance in the first Test and you never know what could happen," added Waugh, who retired from Test cricket after a typically stubborn innings of 80 in the final Test of the home series with India in January had secured the hosts a draw.
Waugh, though, said that the main reason for England becoming a force in world cricket again - the 3-0 series win over the West Indies was their first since 1968 - was they had got some real strike bowlers like Steve Harmison, who destroyed the West Indian batting.
"The biggest thing they've got now is strike bowlers who can put a bit of fear in the opposition," said Waugh, who retired along with twin-brother Mark from all forms of cricket following the end of the domestic season earlier this year.
"The attack is looking good, they've got experience with the batting but they will measure themselves up against Australia."
However Waugh said his former teammates - whom he led to victory in 41 of 57 Tests and also the 1999 World Cup - were still the team to beat in Test cricket especially after their recent series win in Sri Lanka.
"To win in those conditions against Murali was a big feat for the side and particularly Ricky Ponting in his first series (as captain)," he said.
"India loom as the main danger, England are playing some good cricket recently, then you've got the talent of Pakistan and the strength of South Africa.
"It's always difficult to stay on top but I think we can stay on top for a bit longer."