"Despite its faults, it [negative gearing]has at least brought billions of dollars of private capital into the rental housing market, without which, a great deal more Australians could be reliant on government welfare."

How so? Since over 90% of negatively geared homes were existing properties, how does it add to housing supply in any meaningful away? Make no mistake, property investors don't "provide" housing unless they build new homes. Those who buy existing homes don't add to the overall supply, but merely turn homes for sale into homes to let. This doesn't address the overall shortage. It doesn't even address the shortage of rental homes, because the reduction in the supply of homes for sale throws potential owner-occupants onto the rental market. So the full deductibility of negative gearing is not an incentive to "provide" housing, because it is available for existing homes as well as new ones.

The only real purpose negative gearing serves is to waste billions of taxpayers' dollars and inflate house prices by artificially increasing demand.

How so, Leith? Billions of dollars put into the housing market will inevitably lead to more construction. It does this by initially making housing more expensive, which in turn makes it more profitable to build new housing. Thus supply is increased.

The critical determinant of housing supply is in fact the cost of constructing a new dwelling. You can actually build a house meeting health and safety standards quite cheaply, and extremely cheaply if you use shipping containers. So why isn't there a heap of new supply being built? This is the case partly because local and state government severely and somewhat obscurely restrict the right of landowners to develop their land. It is also partly because the housing industry is being heavily taxed to supply some of the new and very expensive infrastructure for a rapidly growing population. Were Australia's population growth rate not so massive the supply of new housing would be far cheaper, far fewer new houses would be needed, and prices would plummet.

There is some very simple ways to increase the supply of new housing and the keep house prices stable and inflation low .
First cut out all speculation on existing houses by charging very high tax rates on investors who buy and sell existing houses for profits and give tax concessions to investors who put up new houses and units .
Because State Governments have been very slow in states like N.S.W in releasing land for development, a big shortage has occurred and also charging excessive development charges has caused many home buyers to buy existing homes over buying new homes .
The state governments needs urgently to have available more housing for low income earners , the simple solutions is that the government is sitting on billions of dollars of railway land .
What they should do is lease or sell all the land above railway stations and let private developers build on railway land on a basis of 90% housing units and 10% commercial and shop buildings .
Because all railway land is close to electricity , water , phone etc , it would be a quick procedure to build on and the buildings would need to be only 2 to 3 stories high .
Also in the process the railway stations themselves also could also be improved at no cost to the government .
The housing rental should be set a a percentage of the basic wage so the tenants could afford the rentals .
Also governments should also encourage the huge super funds to invest in housing by giving them a tax incentive .
Investment in housing is a sound investment because people will always need somewhere to live in the metro areas of Australian cities .Australia is not short of land , just drive between Sydney and Melbourne and 99% of the land is vacant .
There is no excuse for home and land shortages in Australia , we are not living in Hong Kong .