a dividend policy, page-13

You are talking about negative gearing ie where the costs of the investment property are greater than the income it produces and the loss incurred can be offset against other income (like a job or share investing).
If negative gearing was to be dissallowed then investing in residental property would reduce dramatically creating a massive shortfall in rental accomodation. This would create an enormous problem for any government and so they will never abolish it.
There is only one group of people stupid enough to invest in residental property- our moms and dads, God love 'em. And yes, I do have rental properties (keeps the wife happy!)
It sounds like the problem in NZ is not having a capital gains tax; its a necessary evil and the 50% deduction for assets held for more than 1 year is quite generous (but not for assets that appreciate slowly over a longer time period).