To tip or not to tip?

I went to dinner with a friend recently, and we decided to split the bill. As we were tallying up, I said to my friend: "Should we leave a tip?" His response: "No. We're not in America." So it comes as no surprise to me that an American Express survey reveals that Queenslanders are the worst tippers in Australia. I often do tip, and I always do when I'm overseas. But others argue that doing so just encourages establishments to underpay their staff, or gives them an opportunity to rip us off. I guess the upshot is that a tip should be a reward for good service, not an obligation on the diner.