There are several reasons why property is currently at a high...

There are several reasons why property is currently at a high valuation however NG was around prior to nose bleedingly high prices this should not be ignored.

As mentioned it has made it more feasible for investors to leverage. Who can blame anyone for wanting to minimise their taxable income?

There are infact two government inquiries running at the moment one of them being 'The senate inquiry into affordable housing' there are currently 53 submissions lodged some recommending abolishing NG. Other submissions recommend the reintroduction of capital gains on property sales (arguably it was from when CGT was removed from property that we saw the largest increases over time). Macroprudential tools are also being touted as a measure.
Constipated land management, urban growth boundaries, and growth corridors are also to blame.

The exchange and valuation of property is no longer a factor of housing affordability but mortgage affordability.
How much can you borrow (LVRs)?

It is interesting to note some of the vested interests in these submissions to the inquiry that either do not acknowledge the problem or hide behind perceived scarcity in the market.

If any one feels strongly about this issue I urge you to lodge a submission.

http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Affordable_housing_2013/Submissions

Regarding the removal of negative gearing I think it would take the shine of property investment and divert some of that money into the wider economy where it is needed for productive growth. There is however zero (0) political will to do so.