SINCE 1971, this newspaper has selected an Australian of the year, an individual, occasionally a number of people, who have helped humanity, whose epic achievements in sport or science, the arts or education, commerce or community service have earned our respect. It is always a hard selection to make. Australia is never short of men and women of great spirit, energy and ability. But the sheer size of the qualified field is not the reason we have chosen a large group this year, people personified in the august archetype of the Digger. Today we define the Digger more broadly than the Australian infantry on the Western Front in World War I, who took the name for themselves. Now the title is rightly taken by the men and women of the army, navy and air force. And this morning we honour the 2900 among them who are on active service, providing forward defence of our democracy against the threat of terror attack. They, both because of their individual achievements and sacrifice for their country, and in the way they also represent their colleagues, who are home from foreign duty, or are preparing to go, are our Australians of the Year for 2006.

Some will be surprised by our selection. The Digger is respected but the job our armed forces do is not widely understood. Nor is ours an especially martial culture. Service people have always been citizens first and foremost, rather than members of a warrior caste with values and traditions separate from civil society. And we are not a nation quick to fight or to shoot first and negotiate later. After the imperialist adventure of the Boer War, almost all our military engagements, even the controversial campaigns in Vietnam and Iraq, were undertaken to defend Australia's interests or assist our allies. And so it is today. The Digger is on active service in Sudan and Solomon Islands. The Digger helped deliver independence in East Timor and still stands ready to assist the struggling state from civil strife. And Australian forces will doubtless answer future calls for help in other countries in our region. In all these engagements, and those that may come, today's Digger acts on the great Australian tradition of defending democracy. But it is in Iraq and Afghanistan, and on the waters of the Persian Gulf, that the Digger is serving in the first global conflict of the 21st century - the war on terror. Some Australians assume we are not a terror target, despite all the evidence of foreign threat and enemies within. Others argue that Islamic terrorists, intent on establishing theocratic rule in Afghanistan and throughout the Middle East, are not interested in us. They are all wrong. The evidence of New York, London, Madrid and all the Asian and African cities that have been terror targets demonstrates that the world is at threat from these zealots. And we must confront them wherever they act, both in our own defence and to help the vast majority of Muslims, who are also their targets. That the small size of our armed forces precludes more Australian boots on the ground, especially in Afghanistan, is troubling. Even with the two new battalions the army is raising, Australia would be stretched if problems in the Pacific and Middle East required simultaneous combat commitments. But with new warships and fighter aircraft coming, the army's acquisition of US armour, and the continuing achievement of the world-beating SAS, the Australian Defence Force is capable, albeit on a limited scale, of war fighting, as well as peace keeping.

While there may not be many Diggers, they are strong in the service of just causes. And in this, today's Digger is linked to the first service people who bore the name. For years, academics have argued that the ideal of the Digger is a con, that throughout the 20th century Australians were willing mercenaries in other peoples' wars. But what such cynics always ignore is the tradition of service that has always shaped the Australian way in war. The Diggers who stopped the Germans in some of the most crucial Western Front battles in 1918 were not mercenaries but volunteers, citizen soldiers who, unlike the enemy to their front and the allied formations on their flanks, had freely chosen to serve. These Diggers did their best, in part because, in the Australian way of doing things, they did not want to let their mates down. But they also fought because they did not like the idea of what would happen to Europe and the world if the totalitarian German state were to win the war. The Diggers we honour today are much the same. They serve because it is what they are trained to do, but also because they recognise that the best way to ensure Australia's safety is to advance the cause of democracy around the world.

NOWHERE does the old aphorism that a stitch in time saves nine seem more appropriate than when discussing Australia's inadequate and dilapidated infrastructure. Cities across much of Australia are imposing increasingly onerous water restrictions and even cutting pressure at the tap, thanks as much to a lack of investment in dams and pipelines as the current drought. Despite limited interstate trading in the east, the long-promised national electricity market is likewise far from being a reality. At the root of the problem is investment, or rather the lack thereof. According to data supplied to this newspaper by the Australian Bureau of Statistics, infrastructure spending has fallen from just under 2 per cent of GDP in 1966 to barely more than half that figure last year. In the intervening years, the population of Australia doubled to more than 20 million people.

This infrastructure crisis is in many ways the result of a perfect storm of bad management and bad ideas. The rise of NIMBY politics has made it virtually impossible to site major projects without creating a political uproar from local affected constituencies. This phenomenon has risen hand in hand with a green movement that has forced Labor governments to guard their Left flanks by stymieing dams, power plants and other major projects. Even if there were the political will to undertake an ambitious project like the Snowy Mountains Scheme �?one of the world's most sophisticated water and hydroelectric power systems �?today it would never be built, thanks largely to this noisy minority. The never-constructed Wolffdene Dam in Queensland, which would have held 1.1 million megalitres of water, was scuttled by Wayne Goss's government in 1989. Since then, that state's southeast has become the country's fastest-growing population centre. Economically, too, Australia's infrastructure has fallen victim to faddish notions, in particular the fetishising of surpluses. State treasurers eager to avoid repeating the mistakes made by state governments in the 1980s have over the past decade focused on the preservation of AAA credit ratings and massive surpluses to the exclusion of long-term investment. Such blinkered fiscal thinking is utterly divorced from the real world, where the ability to responsibly take on debt is a key driver of economic growth. Just as businesses borrow to buy the capital equipment they need to expand, and families borrow to afford the lifelong investment of a house, so too should governments be able to borrow to build projects to accommodate and stimulate growth. At the same time, state governments, beguiled by dollar signs, have mismanaged and misengineered public-private partnerships. While these devices are potentially useful, they can backfire badly. In NSW, Sydney's Cross City Tunnel has fallen into receivership, the result of a deal that was handicapped from the start by the state Government's extraction of a $100 million upfront fee from the project's backers. And this is without taking into account the widespread squandering of windfalls from GST and other taxes on recurrent expenditures such as public service salaries.

This sorry situation highlights the need for fresh thinking on federalism. While a federal system that devolves power from a central government to state and local authorities has many benefits, they can only be accrued if those bodies are willing to think beyond the next election. The Business Council of Australia has been at the forefront of calls for reform. Last October, the group released data backed by Access Economics suggesting that federal-state logjams represented a $9 billion annual drag on the economy, or $1100 per household. Meanwhile, the newly formed Energy Reform Implementation Group has reportedly prepared a document suggesting that Australia's electricity grid is biased towards individual states and that the development of a truly national system with uniform reliability standards could cut power bills by 2 to 3 per cent and add $400 million to the national economy. But the cost is more than in just money. Beyond the arenas of water and electricity, poor infrastructure is downright dangerous. The National Road Safety Strategy last year found that improving roads could save hundreds of lives each year. Australia is a country vast in resources and resourcefulness. And it is a country that in coming decades will need to double its population again to remain competitive. While it may not be the sexiest of campaign issues, federation reform deserves to be high on both Kevin Rudd's and John Howard's agendas as we approach the next election.