Animal activists, the Coalition for the Protection of Racehorses, secretly filmed the video which shows visibly distressed horses being held in pens not much larger than the size of their own bodies, before being shot by a man with a shotgun at close range.

Activists say the video highlights the issue of wastage in the horseracing industry, with as many as two-thirds of the horses bred for racing never seeing a race track.

While thoroughbreds can fetch millions of dollars at auction, failed or injured race horses can sell for as little as $70.

"These aren't your Makybe Divas, these aren't your Black Caviars; these are the horses who are slow, injured or didn't make the cut," said Ward Young from the Coalition for the Protection of Racehorses.

"The racing industry is deliberately silent on the issue of wastage because they know that sending thousands of healthy, uncompetitive horses to slaughter each year is unconscionable."

But Dr Napthine said that was an exaggeration.

"It was very dramatic but it certainly was overstating the issue," he said about the activists' video.

"In the horse industry there is a significant recycling program, if want to call it that. For example probably between 40 to 50 per cent of the horses racing are females and most of those go on to a career in the breeding industry. And even horses that don't make it to the racetrack that are female are used as brood mares, there's quite a high percentage of unraced brood mares.

"Then there are the geldings. There is a very high rate of those horses being used in a range of other horse-related activities whether that be equestrian, pleasure or the general horse industry."

But a leading racehorse re-educator Andrew McLean of the Australian Equine Behaviour Centre, said the demand thoroughbred and standard bred racehorses had waned in recent years.

"Although horse sports have grown more people are interested in purpose-bred horses and the European warm bloods as riding horses," Dr McLean said.

"But the fact is most people can't ride them very well."

He said compared with former racehorses warm bloods, which could cost tens of thousands dollars more, often had behavioural difficulties.

"They can be really cool one minute and then hot the next and they can be a little bit less predictable.

"[Shooting racehorses] is a real tragedy, it's such a waste. Most people would be better of with a sensible, well-trained thoroughbred or standard bred."

Dr McLean said some racehorses didn't need any retraining, while some owners could retrain their horses with some guidance.

But RSPCA Victoria president Hugh Wirth said while racehorses could be easily retrained their was no co-ordinated response to transition them from the track to the equestrian arena.

"All the of the things you have been told about rehoming standard breds or thoroughbreds is all correct but it's getting those homes, that's the problem," Dr Wirth said.

"There is just not enough people prepared to own a horse because it is an expensive outlay. You are talking about hundreds of dollars a week to get all geared up and then the rest of it and then you have got to find agistment.

"Frankly, it's Racing Victoria that has to supply the solution. They are the ones that register these foals, they are they ones who provide the racing, the are the ones who responsible ... for the excess number. They can't just walk away from the issue and say 'it's not our responsibility'.

Dr Napthine said he had was confident in Racing Victoria and Harness Racing Victoria's monitoring of animal welfare, but conceded more work needed to be done.

"Racing Victoria and Harness Racing Victoria ... are both working on projects and programs to improve the whole of life welfare of animals in their industry."

Racing Victoria spokesman Shaun Kelly said RV was funding the retraining of ex-racehorses for a life after racing in two Victorian-based programs.

"We actively promote a number of retrainers and in fact, this week we launched a new website, titled Off The Track, that is an information portal on the thoroughbred with a view to life after racing," Mr Kelly said.

WARNING: Graphic images Below is a video posted by the Coalition for the Protection of Racehorses showing injured racehorse being shot.

Wastage - Coalition for the Protection of Racehorses from Fair Projects on Vimeo.