Investors are betting the Reserve Bank of Australia will cut interest rates by a quarter point on Tuesday to match a record low of 3 percent as it seeks to insulate the resource-rich economy against a slowdown in the mining sector.

"You've got on the one hand the prospect of a big stimulus coming today, on the other hand you've got this 'fiscal cliff' in America which nobody really knows how it will be resolved," said Damien Boey, an equity strategist at Credit Suisse.

However it was unclear how the market would react to a rate cut, Boey said.

"Would it respond favourably in the sense of 'oh, good we have the stimulus we were looking for', or would it respond badly in the sense of 'no, the RBA is actually meaning there is a problem yet'," he said, "There's two ways to look at that."

The benchmark S&P/ASX 200 index shed 11.9 points to to 4,519.6 at 0038 GMT. It rose 0.6 percent on Monday to a five-week high.

Top miner BHP Billiton slipped 0.5 percent to A$34.37, while rival Rio Tinto Ltd edged up 0.2 percent to A$58.67.

In anticipation of a rate cut, department store Myer Holdings jumped 2.8 percent and smaller rival David Jones rose 0.8 percent.

Banks were slightly weaker, with Commonwealth Bank of Australia dipping 0.2 percent and Wespac Banking Corp losing 0.4 percent. National Australia Bank bucked the trend by adding 0.4 percent.

New Zealand's benchmark NZX 50 index fell 0.3 percent to 4,035.5.