Investment properties are needed for renters so I was thinking more along the lines of reducing the tax deductions claimable for each property you have. Something like letting them claim 100% on the first place then 80% for the second, etc.
Also, I think there needs to be something to discourage people from owning untenanted properties.
I have more than 1 investment property and both my wife and I work (so we can die and our kids can spend it all! I have shown them how to spend on expensive bikes). At first it seems like you are getting a bit of help but as you pay them off that opportunity to claim the interest expenses reduces and of course as it goes from a loss to a profit you will get taxed on that like all other income.
The other point to make once you do have an investment property it is easier to get more because as your equity in A) your home and B) your investment property(s) rise you can borrow more. Depends how highly geared (how much risk) you want to go. Even though it is real estate (safe as houses mate!) there are still risks, right now with such high occupancy rates they aren't that obvious, but I can tell you in the past there have been times where the vacancy rate goes up. During those times you need to still be able to service the mortgages and that's when people get into trouble and have a fire sale and possibly losing any capital gain, especially if they bought when the market peaked - lose, lose.
So right now, it all looks rosy but even now, one bad tenant can ruin things. I had these 2 young ladies in my unit that refused to open the windows (too cold) or turn on the exhaust fans (electricity costs) while they were taking showers and then tried to claim for damages caused by mildew and mold. I still had to pay to have mold removers come in and clear the place and go to a QCAT hearing to straighten the matter out. They wanted to break the lease and not be held liable to the outstanding term if I could not get another tenant. Fortunately, for them it wasn't vacant long but I was still out of pocket for the mold removal. I was lucky that is all it cost I suppose, while they were not vindictive they really accepted no responsibility for their actions.
So there is a balance. Mum and dad investors help with supply, so it's a balancing act. Foreign investors get no negative gearing tax break, EXCEPT, on new properties - which increases the supply. In fact they cannot buy existing properties only new ones which was designed to increase the rental stocks but it hasn't because there are ways around that. So I have to agree something needs to be done about all these empty properties but also tighter regulation to prevent foreign investment finding its way into the existing market because they can afford to outbid and push up prices in the market.
The thing is a lot of people like a rising market. Peter Dutton will always criticize any measures to put downward pressure on the market and say poor mum and dad who worked hard won't realise a profit. But he's no economist and just a dim wit that likes to throw spanners because he thinks that's what good opposition leaders do and rack up a score. Sorry it's easy to get started on that bloke, you can't help but compare him with Turnbull. Progressively the Liberal Party have down graded from Turnbull (Lexus Landcruiser) to Morrison (Toyota Landcrusier) to Dutton (Morris Minor).
So I think the lever to push, to increase supply, is to restrict negative gearing to new properties, for everyone, especially in times like these. All foreign investment and real estate purchases need to be restricted and enforced to new only, and when they are found to have bypassed regulations, the property should be confiscated, with no compensation - that will send a pretty clear message.