Inflation fight and budget to ease mortgage stress: Rudd

A five-point plan to battle inflation and a "very big" budget surplus will help ease the stress of struggling home-loan borrowers, Prime Minister Kevin Rudd says.

Hundreds of thousands of Australians are bracing for more mortgage pain as they await a Reserve Bank of Australia (RBA) decision tomorrow on official interest rates.

Forecasts show a record number of Australians will face difficulty in paying their mortgages this year.

Research by JP Morgan and Fujitsu Consulting estimates 750,000 homeowners will suffer mortgage stress during 2008.

Up to 300,000 of those may default on their home loans and risk having their homes repossessed.

"Mortgage stress is huge," Mr Rudd told Fairfax Radio Network today.

"I understand fully how acute these problems are."

Mr Rudd says the RBA has complete control of interest rates, but the government is doing the best it can to battle inflation.

"I've done that by announcing our five-point plan for dealing with it (inflation) including exercising restraint by producing a very big budget surplus this coming budget," he said.

"I believe there is a strong economic case for budget belt-tightening by the national government if we want to do our bit in budget policy to make the job of the Reserve Bank easier over the course of 2008 to keep interest rates as low as possible."

But Mr Rudd would not concede that Australians could expect a very tough budget in May.

"I don't want to be excessively dramatic, we're still working our way through it ... but we take our job very seriously in producing a responsible budget."