"Situations were left to bleed," the report said.
The festering and lack of leadership caused swimmers to feel alone and without support.
"Swimmers described these Games as the lonely Olympics and the individual Olympics," the report said.
Morale fell as the publicly anticipated flow of gold medals failed to eventuate, with pressure mounting and no plan enacted to cope with the situation.
"As the first week unravelled, the swimmers felt undefended, alone, alienated ... they felt confused and unsupported by their own team in some cases and not supported well enough by SAL (Swimming Australia Ltd), even from the stands."
The report found the "glorification of a few was seen somewhere between embarrassing and irritating to other team members".
"One person said he felt that it was not really about whether you swam your heart out, it was about whether you could sell your heart out," it said.
"Some athletes let their emotion play out as bravado, withdrawal, disinterest and sulking.
"This tension was not nipped in the bud ... indeed it was heightened with scuttlebutt and assumptions and diagnoses of doom from the media and the pool deck."
The report said some older athletes saw the storm brewing and attempted to intervene, but their attempts were seen as being negative and criticising.
Head coach Leigh Nugent and some support staff did not hear about most of the incidents until they returned to Australia.
"Athletes felt disconnected from the head coach, and their sense of duty was localised," the report said.
Australian swimmers won just one gold, six silver and three bronze medals at the London Olympics, the lowest return at the pool since the 1992 Barcelona Games.
The swim team entered London amid claims of schoolboy pranks at a lead-in camp, with allegations that senior members of the men's 4x100m freestyle relay team devised an initiation ritual involving taking the prescription sleeping pill Stillnox on a bonding night.
"There is a dire need to develop and enable leadership throughout swimming," said the report.
And the head coach should also undergo an intensive "coach-the-coach" leadership programme lasting at least three months.
- AAP