Hi tennisnuts,
What rates are you paying on your PPR mortgage and that on the investment property ? Do you have any other short term debt at higher interest rates ?
Personally speaking I would partly agree with your wife and want to have a just in case / rainy day fund of some description.
However, saying that 30k is a sizable sum to have saved. I would look to pay 10k-20k off my mortgage or loan with the highest interest rate, and keep the remainder for my rainyday fund.
It may be worth bearing in mind that a reduction of the loan on your investment property will reduce the interest on that loan, hence potentially exposing you to a larger taxable amount on the rental income received.
Depending on your ages and current payments, if not maxed making once off AVC contributions may provide a much better return on your excess cash, as you both presumably pay tax at the higher rate.