His father, Gustavus John, was a Tasmanian born ship owner who also served as an alderman on the Sydney Municipal Council.
He was educated at Waverley Public, then at the Sydney Grammar School, where he was followed by his brothers—Eben Gowrie and Leslie Vickery—and spent lunch hours browsing in the Australian Museum next door.
[1] After matriculating from Grammar in 1895, Waterhouse enrolled at the University of Sydney, where he graduated with bachelor's degrees in science (1899) and engineering (1900).
His science degree was awarded with first class honours in geology and palaeontology, having studied volcanic dykes in the Triassic rocks around Sydney under Professor (Sir) Edgeworth David.
[1] Their son, Stretton Gustavus John Waterhouse, was killed in action in New Guinea in 1943 during WW II.