The coalition is playing down a widely anticipated interest rate cut in the first days of the election campaign, claiming the central bank is only compensating for poor government policy.
Shadow treasurer Joe Hockey says the central bank should not be in the position of having to cut the cash rate "because the economy should be growing faster".
Prime Minister Kevin Rudd described such comments as an "absolute clanger" and a kick in the stomach to families struggling from cost of living pressures.
"Effectively, (Mr Hockey) is saying `it's ok, you can have higher interest rates'," Mr Rudd told reporters in Canberra.
Financial markets expect the Reserve Bank of Australia (RBA) to cut the cash rate on Tuesday.
New data showing flat retail spending and generally poor business conditions only fuelled expectations for a rate reduction to a fresh all-time low of 2.5 per cent from 2.75 per cent.
It will cut almost $50 a month on repayments on an average $300,000 mortgage, assuming the reduction is passed on in full by lenders.
Coalition leader Tony Abbott says lower interest rates are helpful when the economy is "flat-lining".
"But you have to appreciate that if there is a cut tomorrow, that won't be some kind of win for the government. It will be the result of the fact that the Reserve Bank judged that our economy needs a boost," Mr Abbott told reporters in Brisbane on the first full day of the election campaign.
"It is not getting a boost from the policies of this government."
The RBA last cut the cash rate in May but new retail data showed it has failed to encourage people to spend.
Retail spending was virtually unchanged at $21.82 billion in June from the previous month, when economists had forecast a 0.4 per cent rise.
At the same time, the Australian Chamber of Commerce and Industry's (ACCI) latest business expectations survey found employment conditions at a four-year low and selling prices at their lowest level in the history of the survey - a 19-year low.
The survey's business conditions index managed only a modest increase to 43.3 points in the June quarter from 42.7 points in the previous three months.
This left the index below the 50 point market which separates contraction from expansion.
"Given this inherent weakness across the economy, we expect an interest rate reduction tomorrow and we certainly think it's well justified," ACCI chief economist Greg Evans told reporters in Canberra.
"We are not ruling out further rate cuts."
The September RBA board meeting will be in the final week of the election campaign.
National Australia Bank senior economist David de Garis said although he expected a 25 basis point cut on Tuesday, if the RBA had been of a mind to make back-to-back cuts in August and September, it might consider an immediate 50 basis point reduction.
"The September board meeting at just four days ahead of the September 7 election might be a bit too close for the RBA's comfort," he said in a note to clients.
