Prime Minister Tony Abbott has defended Australia’s current negative gearing policies and has warned that changes to the scheme would result in higher rents.

The Prime Minister made the remarks on Sydney radio station 2GB yesterday  in response to a proposal by The Greens to scrap the scheme and speculation the Labor Party wants to do the same.

Under the proposal put forward by The Greens, negative gearing would be scrapped from July 1 and the savings used to provide affordable housing.

Following that proposal being put forward, the McKell Institute released a report suggesting negative gearing should only apply to new houses.

The Australian Financial Review reported that the report and negative gear was something the Labor Party was considering its position on.

Prime Minister Abbott told 2GB the Labor Party wanted to drive up rents by “fiddling” with negative gearing.

“This is why I am so concerned about the Labor Party's apparent attempts to dabble with negative gearing because if you muck around with negative gearing effectively you have put rents up," he said.

"If you look at what the Labor Party is proposing at the moment they want to hit your super with more tax, they apparently want to drive down the value of your existing home and now it seems they want to put rent up by fiddling with negative gearing."

Shadow Treasurer Chris Bowen said told ABC Radio earlier this week the party was yet to decide on a negative gearing policy it would take to the next


"We have specifically said it would be irresponsible to say that we would not take any particular changes [to negative gearing] to the next election, but we will have two principles – one, that we would not disadvantage existing investors who have made investments in good faith and secondly, that we would look very closely at impact on housing supply," he said.