"Here in the ACT, people can see a very direct result, not only of government funding for community services but also the results of their donations in terms of practical programs that make a difference in people's lives," he said. "We're the richest city in Australia, so not only is it the right thing but it's the appropriate thing that we are the most generous as well."

Damn right, we can afford it, too, and not only so as to benefit needy people in the ACT, though that may be our first obligation and Barr's first responsibility. The Smith Family does very specific spending on ACT projects, but theirs is a national drive, and there are many parts of Australia that are doing it far worse than in Canberra. Indeed, though the ACT has its pockets of poverty, there's no particular upturn or crisis in its incidence. Truth to tell, Canberra is a city whose charity regularly helps other parts of Australia, and the wider world.

And there are many parts of the world, not least in Syria at present, where many people are doing it a lot harder than almost anyone in Australia.

But Canberrans can afford a good deal more from their government and themselves, and it's more than time for them to consider how it could be better than it is. Better in the physical sense: an improved built environment operating more sustainably in its bush setting. With personal and public facilities thatserve us better as individuals, households, citizens of the ACT, Australia and the world. A city on top of the heap again setting standards in a physical and social environment, in health, education, culture and security, that both supports our community but also sets fresh standards for a better world.

Former chief minister Rosemary Follett reminded us this week of the excellence of the ACT school system, and she was right. But even its report card must be marked "could do better". She was writing only a week after an OECD report indicated that Australian schools were now falling behind the world's best schools, and even the average Australian students of a decade ago. We're actually going backwards while others are steaming ahead.

Canberra students were, of course, on average, streets ahead of other Australians, but that may be less of a reflection of our schools' excellence than of the fact that Canberra parents are, on average, middle-class professionals with high standards and aspirations for their children. We, too, are slipping.

Australians are proud of their national capital, and more than a little envious of what they imagine to be our silk manicured roads and amenities, generally but wrongly imagined to be highly subsidised from elsewhere. But Canberrans are increasingly aware that there's more than a little squalor behind the facades, not to mention a reduced quality of services. Modern Canberra houses no longer set the national and international standard for suburban amenity. The streetscapes are wonderful, but the urban architecture, public and private, is pedestrian.

But it's not merely the physical infrastructure that looks a little tatty, a little cheap and more than a little second rate. Some of the social fabric is also fraying. Locally and nationally, the city of government and public administration is finding it harder to attract and retain the brightest minds, and to harness them around developing good policy and programs that serve the city and nation. A good deal of the rot comes from the top, with poor public service leaders, perhaps never more smug, complacent and well paid, even as they trash agency capacity, agility, flexibility and innovation, and the public service's reputation as a good employer. It isn't the bureaucracy's fault that the government's standing is so low, but it is the bureaucracy's problem that it lacks champions and exemplars even among its leaders.

The uncertainty of the public administration is worsened by hyperpartisan politics, an increasing lack of faith in what can be achieved by collective effort, and an amplification of a 40-year trend to belittle and diminish the very idea of public service. And, at just the same time as the effort to live within budgets, to limit the size of government and to cope with the new demands of an economy increasingly subject to international headwinds, there's a new spirit of public meanness and short-term thinking. For many, it might be best illustrated by Australia's appalling conduct towards boat people, but massive cuts in aid to overseas nations show equally how we have turned our backs on people worse off than ourselves. We can afford better; as our supposed leaders sometimes boast, the nation has never been richer; our stake in international stability and human happiness never so great.

Next week, mid-year budget estimates will be interpreted to suggest that Australia is in serious economic trouble and stumbling badly. If we are to have growth and jobs, some economic sacrifices might need to be made. But government, the economy and the society is in no crisis. There's a leadership vacuum, but in no field so much as moral leadership.

"We can afford it" might make a motto for Canberra in the year ahead. Not only as a measure of confidence in the capacity of the city and the nation to meet the challenges, but as a rejection of the idea that the logical response to public problems involves turning off the taps, pulling down the blinds, selling the family treasures and living as though we were starving. Most of the national economy's major problems will be best addressed by more and better focused public spending, rather than further contraction of the public sector.

The economy doesn't need an array of short-term panic reductions, but more thoughtful, more long-term policy and intelligent public investment. It doesn't need mad pork-barrelling on the Barnaby Joyce model. But a good deal of the social and physical infrastructure needs review and renewal rather than further deterioration and decay.

Likewise with many of the wider problems of the community, not least in sustaining the myriad social networks and supports for those who are worst off. We can afford it.

But back to the people of Canberra. There are churlish folk who begrudge any form of public largesse with taxpayers' funds, particularly when a politician is giving the impression he has reached into his own pocket. The ACT government's donation to the Smith Family was modest enough, perhaps too modest given other self-indulgences of recent years. But I'm not criticising: I think it does us all the world of good to have regular reminders of our good fortune and our obligation to share it with those who aren't so fortunate.

There is almost certainly no city in the world in which the average standard of living is as high as it is in Canberra. There are, of course, concentrations of people, probably in almost all cities of the world, where a people in a street or a suburb are richer, and safer, and live as long in security almost as perfect as ours, but the average, the median and the modal lifestyle in this population of about 450,000 (counting Queanbeyan) is probably not matched anywhere on earth. And, if there are any places that come close, their winters are a good deal colder.

We might not all deserve personally what we have, but this standard of living exists because of the nature of Canberra as the nation's capital city, and decisions by Australia's founding fathers about creating a new city in the bush, which was to represent a model of ideal and sustainable housing, facilities and social infrastructure. A well-educated public service may have been at the base of the community, but it inevitably found itself collocated with a military establishment, a diplomatic establishment, a cultural establishment, an educational establishment and, naturally enough, a honeypot of lobbies, think tanks, advocates and people promoting various interests, ideas and ideals. Meanwhile, the resident population, including all these establishments, generated its own need for builders, butchers, bakers, lawyers, teachers, nurses and so on. We do well to remember that there are in the community many people who don't enjoy the middle-class comforts and security that marks the average, but even there this is a community – indeed, a city state – with the will and the capacity to do much more about it than most. And, as Barr suggested, Canberrans, as much as their government, are generous, with private as well as public aid, to worthy causes, and not only with their money but their time and energy.

It's always seemed to me that, perhaps consistently with our standard of living, Canberra has a lower proportion of wowsers, and fewer narks and prigs worrying endlessly about whether beggars are really poor, homeless or workless, whether our unemployed are living so well that they refuse to work, or whether we have to accept some collective responsibility for others.

I decided very early that Tony Blair, then leader of the British opposition Labour Party and yet to become prime minister, was a pious humbug. He loudly and priggishly declared he would never give a penny to a beggar lest he didn't deserve it. My grandfather, the world's softest touch, used to quote GK Chesterton saying charity was giving to the undeserving; giving to the deserving was simply a matter of public duty and earned no special grace in heaven. (He would also remark that the only currency in heaven was the money one had given to the poor while one was alive.)

Be that as it may, it's interesting to reflect, at the end of a tedious year of local, national and international affairs, on what Canberra's position at, or near, the top of the living standards totem pole might mean. It's not a mere reflection of wealth or purchasing power, though it's by no means any sort of guarantee of happiness. It incorporates a measure of our good health, good climate and environment (physical and social), high educational standards and critical mass of public facilities, including roads, waters, cultural centres, sporting arenas, shops, clubs and libraries. It also reflects our housing, surely providing the greatest average living space per individual, and, probably, the greatest average number of vehicles per head.

We all fight and argue interminably about how all these are organised and displayed, and about the relative priority of projects to extend , repair and design such goods and services. But it's not only in developing countries that other people hear our arguments and think them precious, even offensive given the poverty and insecurity in which they live. Even for Europeans and most Northern Americans, the living standards that most Canberrans take for granted are the ones to which they still aspire.

Indeed, on paper, Canberra is the light on the hill, the earthly paradise towards which they are headed, or would like to be headed. They, too, might organise the wherewithal differently – and differently value some things, such as the beauty, the human scale, or the intimacy of a Paris or a Budapest . But they still look on with envy at what we have (and sometimes with contempt at how much we take for granted).

But willy-nilly, Canberra itself seems to have no such light on the hill. It must either imagine becoming an even better place or, perhaps, simply wallow in what it is. We might have it all, compared with others, but there's nothing to be too complacent about, and a good deal that could yet be improved. And not only for our smug self-satisfaction but by way of setting an example and sharing our blessings with a wider world.

Jack Waterford is a former editor of The Canberra Times.