imugli made a good point, if you pay off loan balance (ie. building equity) in the investment loan account, when it comes time to redraw to buy PPOR, the "future" mortgage interest on that same portion of the investment loan is no longer tax deductible, in the eyes of the ATO.  So if you plan to buy a place to live in over medium term, then probably  best to deposit into a high interest bank account. 

i am always about trying to stay cash-flow positive or as close to neutral as possible (in the case of being negative), so you do want to choose a place to park your cash that gives you t a fairly high interes rate, like term deposits with Bank West or Techer's Credit Union (they do allow non-members to open up term deposits with them).  but like imugli says, get an accountant / financial advisor.  generally, your gains should outweigh the fees they charge in the long run.

pls don't take this the wrong way as i am genuinely asking a question here.  in the situation that kyla raised, is strategy to negative gear even make sense?  putting aside other factors like capital growth, depreciation, etc., if i have $10k extra cash, then i would pay off the mortgage rather than do anything else with the money (of course, it is correct to mention about maximum amount allowed to overpay the fixed rate loan until you incur a fee). 

the property already exists, the loan already exists….what to do with $10k is not going to change the capital growth structure, depreciation schedule, etc.  why stick with negative gearing and pay 70% of your money to get the other 30% tax benefit?

tax rates come into play obviously, but also interest rate difference between kyla's fixed rate vs high interest bank account. 

ultimately for me anyway, if i have $10k lying around, people tend to find ways/excuses to use it, so might as well put it somewhere they can't touch and don't feel the urge to go and spend. 

I find it strange that the Government would be asking that banks, which are for-profit organizations, lower its interest rates charged to their customers.  Should we landlords lower rent because interest rates come down?  Of course not (at least I think so), unless we have to. 

People are borrowing money from institutions whose sole interest is to maximize shareholder value……and it should certainly be kept that way.  Banks will always be looking after themselves and their "owners", ensuring that they make as much money from their customers (us) as they can and are allowed to under the regulated system.  Of course, the rates they charge will be based on what they can get away with (demand), taking into account various defaults they expect to experience, loss of market share (if any), etc.

The Government should focus more on creating a business landscape that allows for more competition.   There is a lot still to be done on this as I believe the smaller lenders are now being squeezed out of the market and the big banks are getting bigger and bigger without enough competitive pressure.  I don't have a problem withbanks getting bigger, but I do have a problem when they get bigger through monopolizing the market and that's what I think the current business environment allows them to do just that.

I don't own bank stocks and I have a big mortgage.   Of course I want rates to come down so I can keep money in my pocket, but I also believe in the ideology of capitalism, the concepts of supply / demand, competition and ultimately "choice".   I wish Rudd would just get on with it and focus more on how to ensure smaller lenders/banks survive and can grow to compete with the big 4.