The central bank will hold its monthly board meeting on Tuesday where a cut in the cash rate to 0.75 per cent from one per cent is expected to be endorsed - the third reduction this year.

The cut is expected because the latest economic data shows the Australian economy is slowing down, even though Treasurer Josh Frydenberg remains constantly upbeat.

"We've seen our interest rates come down quite substantially, so too the interest rates right around the world," he told Sky News on Monday.

"The impact of that has been to help stabilise the housing market, where clearance rates are now above 70 per cent in the major markets of Sydney and Melbourne, whereas they were around 50 per cent this time last year.

"We've also seen prices rise after a period of consecutive months where they fell."

The treasurer is keen to maintain a "wait and see" approach.

"As a government, we're responsible for fiscal policy, and they're responsible for monetary policy," Mr Frydenberg said.

Reserve Bank Governor Philip Lowe in a speech last week said while he is optimistic the economy has seen a gentle turning point, it was not unreasonable to expect a further easing in monetary policy.

He is concerned there are increasing downside risks to global growth, weaker than expected domestic growth, a rising unemployment rate and a stalled pick-up in wages growth.

Prime Minister Scott Morrison said he expected any interest rate cut to be passed on in full by the big four banks, who have a mixed record on recent interest rate cuts.

"I would want banks to fully pass on any changes that were made, if they are indeed made, but I don't think there's any certainty about that question," Mr Morrison told reporters.

Labor's shadow treasurer Jim Chalmers said the government was sitting on its hands and "hopelessly and dangerously out of touch".

"Interest rates are at record lows because the government has a political strategy but not an economic policy," he told reporters.

There are doubts that a further reduction will provide a much-needed lift to economic growth, which was struggling at a decade low of 1.4 per cent in the year to June.

Business Council of Australia chief executive Jennifer Westacott agrees with former Liberal treasurer Peter Costello, who believes the economy needs tough reforms rather than cheaper borrowing costs.

"(Rate cuts are) not going to change the trajectory of business investment and it's business investment that we need to actually fire up," Ms Westacott told Sky News.

She said business investment is at its slowest since 1994 as a proportion of the economy. With tax cuts for large businesses off the table, she wants to see an investment allowance to encourage spending.

All eyes will be on retail spending figures on Friday for a sign of whether past interest rate cuts and personal income tax cuts are having an impact.

Economists forecast retail trade grew by 0.5 per cent in August after the disappointing 0.1 per cent fall in July despite two rate cuts and the introduction of tax cuts.

Australian Associated Press