Treasurer Jim Chalmers has refused to predict the Reserve Bank’s keenly anticipated rates decision, while continuing to spruik Labor’s economic credentials.

“We’ll know tomorrow afternoon whether the independent Reserve Bank’s decided to cut interest rates or not,” Chalmers said on Monday.

“The cost of living has been the No.1 focus of this government, and that will continue to be the case no matter what the Reserve Bank decides independently tomorrow.”

Chalmers faced the media on Monday as RBA board began its two-day meeting. Money markets and a majority of economists predict it will end on Tuesday afternoon in the first cut to official interest rates in more than four years.

If so, it will be a major boost to the Albanese government’s hopes ahead of the upcoming federal election – although Chalmers refused to speculate.

“They will take their decisions based on the economics, not the politics. And the respectful role that I will play in that is to not engage in a running commentary about their deliberations,” he said.

“We know that this election will be really tight. It will be contested, and that’s as it should be. Elections in this country are typically very tight at the federal level, and I expect that to be the case once again.”

One of Chalmers’ junior colleagues was much more definite, however.

Sam Rae, who was elected to the outer-western Melbourne seat of Hawke in 2022, urged the Reserve Bank to cut rates.

“I want a cut,” he told Sky News.

“My community needs a cut.

“I agree with the Treasurer and most other people that the RBA is independent, it will make its decision based on economics and not politics. And that is important.

“But my job is to stand up for my community and we need a cut.”

Opposition Leader Peter Dutton, meanwhile, said he hoped for a “25-point cut, or if it’s more than that, that’s fantastic”. But he rejected the idea that it would be an endorsement of Labor’s economic management.

“The short answer is no … interest rates have gone up 12 times under the Prime Minister’s watch,” he said.

He accuse Prime Minister Anthony Albanese of being “distracted right from the very start”.

“He spent the first 16, 18 months of his term in parliament on the [Indigenous] Voice [to parliament]. And it meant that he wasn’t concentrating on how to deal with inflation, how to deal with the decisions that needed to be made in the first couple of budgets. Instead, he was distracted by the Voice and other issues and it’s just meant that interest rates have been higher for longer.”

Dutton said the government’s energy rebates had also kept inflation higher for longer. The Coalition has pledged to scrap them if it win’s the federal election.

“Say you give a family $300 but their electricity bill has gone up by $1000, people are happy to take the money – but it means their interest rate is staying higher on their mortgage for longer. That’s what the Reserve Bank has warned about,” Dutton said.

“You can put out little amounts of money that people happily take and they’d be happy to take more because the costs of everything has gone up under Mr Albanese, but they all say no – Australians aren’t stupid. They know their power bills [have] gone up by $1000.”

Meanwhile, as eyes turn to the RBA, borrowers are warned not to expect major rates relief this year.

In a survey of 32 Australian economists, 25 predicted a cut of 25 basis points, including independent economist Saul Eslake.

But Eslake said the RBA was unlikely to cut as hard as its peers, including central banks in Canada, NZ, Britain and the US, which have already begun easing cycles in earnest.

“That’s mainly because it didn’t put them up by as much as those peers did, but also because fiscal policy is turning stimulatory in Australia,” he said on Monday.

Australia’s peak cash rate of 4.35 per cent is significantly lower than the 5.5 per cent it reached in the US and 5.25 per cent in Britain, while the federal government stares down the barrel of a decade of budget deficits following two consecutive surpluses.

Ongoing strength in the Australian economy (compared to Canada and NZ, where high unemployment and recession are more pressing concerns) and the potential for Donald Trump’s trade policies to spur global inflation again also made cuts less urgent, Eslake said.

Most economists predict a “shallow” easing cycle.

Scott Solomon, co-portfolio manager of T. Rowe Price Dynamic Global Bond Strategy, expected the RBA to be “extremely balanced” in its forward guidance.

He predicted the board’s post-meeting statement would warn the market not to expect a quick or extensive cutting cycle.

While the path forward remains unclear, markets are pricing in just three 25-basis point cuts before the end of the year, higher than ANZ’s prediction of two cuts.

Even if banks pass the rate cut on in full, mortgage holders are still likely to face rates above 5 per cent for the foreseeable future, with the average variable mortgage rate at 6.51 per cent.

The Property Council of Australia wants the government to cap interest rates for first-home buyers purchasing a new build, by offering a guarantee for lenders.

“With cost-of-living pressures and housing affordability consistently the two issues of most concern for Australians, the government can and should use its balance sheet to support first-home buyers and the delivery of new homes,” chief executive Mike Zorbas said.

Under the proposal, which would apply only to people planning to live in the property, first-home buyers could expect to save up to $1087 every month and $13,044 annually, Zorbas said.

“This policy requires zero up-front government spending and would be subject to appropriate credit checks and serviceability assessments, meaning future exposure will be minimal.”

-AAP