Australia may find it hard to meet the demands of the 'Asian Century', this was hinted Monday by former Treasury Secretary Ken Henry in a speech before the Australian Industry Group held in Canberra.

The main concern, Mr Henry said, is the insufficient infrastructure that the country has at the moment and any plans of build-up would pose problems for the national government considering the present levels of federal tax revenues.

"We don't have the infrastructure, that's obvious, for another 14 million Australians. But we don't at the moment have the mechanisms for thinking about what sort of infrastructure we are going to need," Fairfax reported the former Treasury chief as saying.

"The fundamental question of course confronting all of us about that infrastructure build requirement is how's it going to be funded?

Clearly, the country badly needs to rehabilitate its tax program in order to generate more revenues that would stave off future expenditure pressures, Mr Henry said.

He added that current Treasury Secretary Martin Parkinson was correct when he declared last week that the era of Australian surpluses came to an end the soonest state and national earnings started shrinking at alarming rate.

"It is true as (Mr Parkinson) said the other day that the Australian tax base simply will not deliver what people expect of it," Mr Henry said.

He called attention on the need to better the current tax debate, warning that "in order to get to the place that we need to get to, we are going to need a hell of a lot better debate."

Initiative must come from federal authorities lest the bitter pill of reforms will have to be forced upon in more uncomfortable time and fashion, Dr Henry cautioned.

It could be that the present situation will be dismissed by authorities as far from alarming, especially for states benefitting from the ongoing mining boom, the tax expert said, who also acts as one of the key economic adviser of Prime Minister Julia Gillard.

"But even for the resource-rich states, at some stage the royalties will deliver less revenue than they have been delivering. They are going to front a grimmer fiscal reality as well," Dr Henry was quoted by the Australian Associated Press (AAP) as saying.

In fact, the general condition of state revenues at the moment can be described as 'fragile', which Dr Henry has attributed to plummeting gains both in the share markets and the property sector.

Softening of commodity prices in the past few years also slowed down the financial benefits sourced by state governments on mining projects, Mr Henry added.

He believes that Australia should at least peg its tax ratio as against to the gross domestic product (GDP) to what is the standard among the developed economies.

At its present ratio of 23.8 per cent to the GDP, Australia counts as among the lowest, Mr Henry said, following the standard of at least 25 per cent that was observed in the previous decade.