One of Australia's most respected public policy institutes says negative gearing does not benefit average income earners in the way its proponents suggest.

The director of the Grattan Institute, John Daley, says negative gearing - the practice of using losses on property investments to reduce taxable income - and the associated capital gains tax discount disproportionately benefit Australians in high-paying occupations, not those of average incomes.

He says anaesthetists, surgeons, finance managers, mining engineers, and lawyers, are far more likely to negatively gear their properties than so-called 'battlers'.

They also receive greater tax benefits that those in lower-paying jobs.