Scrapping negative gearing not on the agenda

“There is a real housing affordability problem in Australia and we need to look at all the options on the table,” Mr Bowen said.

“[However], I don’t think either side of politics is going to abolish negative gearing tomorrow.”

Treasurer Joe Hockey said it was a cheap shot to say politicians didn't want to abolish negative gearing because they owned too many investment properties.

“The main issue about negative gearing is this: if you abolish negative gearing on investment properties, there’s a strong argument that rents would increase,” Mr Hockey said on ABC television.

“If you could see some evidence to say that you would not see any increase in rents if you abolish negative gearing there might be a more compelling case, but I don’t see that.”

However, Grattan Institute chief executive John Daley said the evidence shows rents did not rise everywhere when negative gearing was abolished during 1985 – 1987.

“You look beyond Sydney and the answer is rents barely moved in Brisbane, didn’t go up very far in Melbourne, didn’t go up very far in Adelaide,” Mr Daley said.

“They did go up very fast in Perth, which makes you suspect very strongly that [the] race memory we have of ‘abolish negative gearing and rents will go up’ is a race memory built on Sydney.”

Economic theory suggests the abolition of negative gearing should not lead to higher rents, Mr Daley said.

“What happens at the auction is that the investor doesn’t win the auction, but someone who wants to live in the house does,” he said.

“Net impact: there is one less renter and there is one less rental property. Net impact on the rental market: zero.”