The 2010 Henry Tax Review declined to recommend against the practice - its chairman Ken Henry telling a press conference as he was preparing the report that he ''still wears the scars'' from an earlier short-lived experiment with limiting negative gearing in the 1980s.

''I actually think Henry was incredibly wussy about it,'' Bank of America economist Saul Eslake said on Tuesday. ''I have to translate the words 'negative gearing' to people overseas because it just sounds crazy to have a system that rewards people for losing money.''

''Removing it would be close to the top of my agenda. I have a list of what I regard as the worst tax decisions of the last 20 years. One is the halving of the headline rate of capital gains tax [in 1999] that made negative gearing attractive.''

''The others are the abandonment of indexation of petrol excise, the senior Australian tax offset - the measure that says if you are over 65 you pay less tax on a given amount of income than if you are under 65 - and the abolition of income tax on super fund earnings paid to people over 60.''

''They would be my contenders for the dumbest tax decisions of the last 20 years. Frankly, I can't choose between them.''