The paper supports the view that CG tax treatment is the first matter at issue and that NG is a lever.

The sharp rises in Melbourne and Sydney, that were founded upon supply and demand, were accelerated by the tax treatment. The same did not occur in other cities. Clearly tax does not determine the direction of property values, only the rate.

Take away the CGT carrot, problem solved. Return to the no concession and CPI indexed cost base.

RBA also asks, (rhetorically?) about a "Potential increase in rents?" So what's the answer? I think it knows.

There would be no "Large-scale sale of negatively geared properties?" simply because changes are grandfathered. Hardly rocket-surgery.

Taking away NG on older property will do away with many M&D aspirants to invest in rental property. Fine, Gov't will have to dream up other ways to outsource/promote housing supply.

On the psyche of the currently negatively geared housing investor:

Does he hold and wait to see the election outcome, or does he sell now? LNP could still move on NG by promising to cap it, grandfathered of course.

If he holds and Labor wins, many investors will avoid property until the market sorts itself out. Less buyers equals lower prices. This may already be happening.

Nobody will invest in new homes with the immediate depreciation caused by an uncertain resale market and rents where they stand. So rental housing supply will not grow with demand.

Rents will rise until the business case for investment in used/older houses becomes attractive without NG. The increase in rents may entice some investors to build new rentals but, IMO, they'll invest in more certain enterprise.

Gov't can either build and manage more public housing or lay out incentives (tax concessions?) for investors.

The stupidity in all of this lays in that the ultimate Gov't tax take is no different with NG in place than with other ways that operating losses might be written down, such as through a company structure, for example.

The RBA paper's focus on financial stability is a concern over the way tax treatment accelerates a housing bubble founded on demand exceeding supply. The focus should be on the overly generous CGT concessions, not NG. Bring back full CGT at the marginal tax rate with a CPI indexed cost base.

Correction to first line of last post, "On the psyche of the currently negatively geared housing investor:"

Replace with "On the psyche of the current housing investor"

The post applies to all current investors, not just negatively geared ones.

On ABC Lateline last night the point that NG is time-shifting of an operating loss was made by Sinclair Davidson. http://www.snappytv.com/tc/1896915

Also, the fact that the LNP has failed to argue that housing supply is the fundamental issue where prices have risen sharply (i.e. Sydney and Melbourne), was noted.

Also on ABC this week, Duncan made quite a name for himself on Q&A drawing 10K or so far through crowd funding. A few points:

Carbon tax compensation was not withdrawn from him when the CT was abolished.

The GST he pays at the supermarket is not on fresh food, and, his disability pension was adjusted for the introduction of the GST, so any GST he does pay is already in his wallet.

The budget repair levy on high earners was for a fixed term that is ended. It is not a tax cut.

So Duncan's song "What About Me", while he gave a good rendition of it, was not backed with any recognition that his concerns have been met in the past and are are not necessarily addressed in every budget.

A third of Australian families receive more in welfare than they are taxed (it's true, I heard it on the ABC). Try to reduce that proportion and you're up for the political fight of your life.

Unless the LNP comes out all guns blazing, with facts that I've been harping about and Sinclair Davidson points out, it has lost the politics on NG. It should retreat to capping it, with losses beyond the cap able to be carried forward to future financial years.

It should also reverse Costello's largess on CGT, as it has on superannuation in this budget and a point Duncan failed to mention

The individual wage earner or person on a fixed income who is trying to provide for his retirement and education of children, does not enjoy the advice and structures available to others for example, those who can incorporate themselves to lessen their tax.

One has to question why Saul Eslake and others must put a negative spin on what they call 'negative gearing' and remove one of the very, very few ways a private person of relatively low nett worth and low liquidity can invest in the very large property sector.

As far as the chattering classes of the faux left (include the ABC) are concerned, those despicable property owners and landlords are all wealthy and shouldn't be investing in property anyhow. They certainly must NOT be allowed to make a profit. So, NONE of that disgusting 'positive gearing' either. That just shows how the landlords profit from the 'vulnerable'.

It is the federal government that is withdrawing the availability of a paid retirement, the aged pension and aged care, from the aged and it is the feds who are forcing everyone who doesn't have a lucrative golden handshake to look forward to as politicians do, to sacrifice their quality of life for all of their years of employment and squirrel away money, taking risks too, for later.

It is all very right for Eslake and Shorten to cast the 'landlord' as the whipping boy for alleged high house prices (prices are only 'high' because of over-population in the highly desirable cbds of capitals - through immigration), but have either come up with recommendations as to how those ordinary investors might prepare themselves for a future that the federal government itself refuses to provide?

Do either recommend that government should be taking up its responsibility for social housing and how?

Shorten is about new taxes and big spending promises. No way he will rein in known wastages of taxpayers' money.

My, "prices are only 'high' because of over-population in the highly desirable cbds of capitals - through immigration)"

should be (omitting 'cbds'),

"prices are only 'high' because of over-population in the highly desirable capitals - through immigration)"