A GROUP of students from the University of Canberra have developed a system that can read people's thoughts and translate them into words on a computer screen.

The "Brain Speller" headset tunes into signals being sent from the brain using electrodes attached to the scalp.

Once the signals have been detected, a software program can translate them into words, allowing sufferers of paralysis, brain damage or dementia to communicate.

Users are given a portable computer which runs the program.

Approximately 350,200 Australians need assistance to communicate or have trouble doing so due to disability or disease, according to the Australian Bureau of Statistics.

Team leader Paul Du said he hoped the system could be used to help dementia sufferers and people with severe physical disabilities to improve communication between patients, carers and their families.

"The whole idea was we were doing some research and we just found that the disability statistics were so vast in Australia, and around the world," Mr Du told news.com.au.

"We're excited by the opportunity to combine imagination and technology to create a product that will improve lives and genuinely help with an issue that affects so many people in this country."

For their invention, Mr Du and his team were crowned "Team Australia" at the national finals of Microsoft's Imagine Cup 2011 last night at the Powerhouse Museum in Sydney.

The honour has earned the team of budding inventors a spot at the world finals in New York in July.

There they will compete with 400 student finalists from around the world that have developed technology to help combat disease, poverty and child mortality and ensure environmental sustainability.

A victory would earn the team a $25,000 cash prize to put towards the system.