We certainly can afford not to reform Australia's tax system, and the current government seems determined to avoid any hint of it - unless Treasurer Costello has been preparing a Very Big Secret Indeed for his budget speech.

To become the "poor White trash of Asia" as Lee Kwan Yew famously but so far incorrectly predicted, may be no bad thing. According to an article by Lydia Polgreen in The New York Times yesterday, http://www.iht.com/articles/2006/03/06/news/optimism.php :

"One glance at the statistical profile of the continent's 900 million people will tell you that Africans can expect to live the shortest lives, earn the lowest incomes and suffer some of the worst misrule on the planet. They are more likely than anyone on earth to bury their children before the age of 5, to become infected with HIV, to die from malaria and tuberculosis, to require food aid.

"Yet a recent survey by Gallup International Association of 50,000 people across the world found that Africans are the most optimistic people. Asked whether 2006 would be better than 2005, 57 percent said yes. Asked if they would be more prosperous this year than last, 55 percent said yes.

"These data bear out what I see all the time as I travel across sub-Saharan Africa as a correspondent: that every single day lived here, each birth, wedding, graduation, sunrise and sunset, is, in ways large and small, a daily triumph of hope over experience.

"Hope, it seems, is Africa's most abundant harvest."

The Gallup finding is consistent with the latest World Values Survey finding, http://www.worldvaluessurvey.org/ that, incredibly, Nigerians constitute the happiest nation of the hundred and something surveyed. (Over 65% of people surveyed described themselves as "very happy"; the figure for Australia was just over 40%.)

While it would mean junking most people's current aspirations, it is possible that we would be more content and more optimistic living in a "White trash" economy than we are in the present one.

Perhaps that is the secret Howard-Keating vision for Australia.

Absolutely spot on. Australia has a "removalist"-based industry shoveling out Australia into ships for value adding overseas (mining of course and therefore with tolerance to a low value currency). The income from just 4 per cent of employment goes towards the building of oversized real estate underpinned by a regressive tax system. A deadly duo.

Australia still visions from one three year political cycle to the next that will haunt us sooner than later.

Yes, trade deficit is alarming;

Australia needs to re-invent itself to generate *sustainable* revenue;
(Mining, of course is NOT sustainable).

Where to look for it?

The main source of sustainable economic growth is the human capital. We need to look for ways to unlock people passions and ideas, skills and dreams...

Australia needs to STOP WASTING the enormous human potential of migrant professionals. Isn't it a waste to have so many engineers, doctors and architects driving taxis?

Australia needs to encourage entrepreneurship amongst young, amongst disadvantaged groups (as the most effective way to help people to achieve self-reliance and sense of self-fulfilment)

Australia needs to fix the problem of its highest bracket of the effective marginal tax.
It is extremely damaging to the peoples' morale and is discouraging employment.
And NO, IT'S not the top end of the town.

The highest *effective* marginal tax rate is paid by people who are trying to get out of the poverty trap. (The *effective* marginal tax rate includes value of all benefits you are losing because you want to work). The highest *effective* marginal tax rate is being estimated (in most extreme cases to be as high as 110%; 70% is quite common.)

True, taxing high people who are making good money is not good either - it stimulates tax minimisation, and encourages whole cohorts of smartest people in the country to work in un-productive (in terms of the ultimate social benefits) areas of tax minimisation and avoidance

Paul J. Dabrowski Ph.D.

www.creativewinwin.com