The real interest rate, in simple terms, is the nominal interest rates minus the inflation rate. This means that when inflation is high, the effective tax rate is lowered. For example, as mentioned by Dr Webb, advisers noted that the interest rate in December 2021 was 4.9 percent, and inflation was 5.9 percent. Therefore, the real interest rate was negative 1 percent. We note, in respect of the December 2021 quarter, landlords who claim interest as an expense deduction at the nominal rate will be claiming a tax deduction for something which was, in real terms, not an expense at all. 