Correct, it's an offset against the taxed rental income. However there does need to be a CGT on investment properties otherwise NZs economy will never regain its productivity.
There are already more investors coming back to the market, so the tax changes will create more rental supply & hopefully bring down rents.
I think we may have seen peak rents & rents quite often are an inverse to house prices. With more investors back we may also start seeing house prices improve.