"Also, if a person earns more that he or she can reasonably spend, and millions of Australians are in that position, they are discouraged by high marginal taxation to invest surplus money in profitable ways"
I would say in more productive ways rather than profitable ways.
If they invest in their own homes rather than in income producing assets then that must be because at least in great part that type of investment is more profitable when taking into account risk, projected house price increases, capital gains tax exemptions and the gov pension income and assets tests exemptions.
This would be the case even if we did not have a progressive tax system. In other words, it is not the tax rate that is the problem.
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"Also, if a person earns more that he or she can reasonably...
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