Next week's budget will cut $1.3 billion from federal department spending to help families battle inflation, Prime Minister Kevin Rudd says.

Mr Rudd vowed to end what he called "profligate spending", saying cuts were needed to reduce pressure on families from high interest rates.

But the promised $31 billion of tax cuts will be delivered, despite the economic blows from rising oil prices, the US sub-prime meltdown and the slide in the Australian stock market in March, as well as a 16-year high in inflation.

"Some economic commentators say we shouldn't be delivering tax cuts to these families," Mr Rudd told a business breakfast in Perth.

"But we promised to do so and we promised also to increase child care assistance in the budget and we intend to deliver on that."

Mr Rudd said for a family with one parent working full time and the other working three days a week - for a combined gross income of $75,000 - the budget would deliver tax cuts of $27.88 a week.

The budget would also increase the child care tax rebate from 30 to 50 per cent and pay it quarterly, at a cost to the government of $1.6 billion.

However Mr Rudd said the budget would not be popular, ruling out quick fixes and handouts in favour of a long-term plan to rebuild neglected areas like education, health and infrastructure.

"The budget process has been long, tough and demanding," he said.

"We've had to make some difficult decisions on the way through, and they won't all be popular.

"For too long, budgets have been an annual political set-piece, in which the government of the day delivers a swathe of handouts and quick fixes.

"It's no longer good enough given the challenges we face long term."

For Australia to compete and succeed in a rapidly changing world, it needed a long-term approach and a government which looked beyond the three-year electoral cycle, he said.

"That's why I'm determined this budget will not be another one-year wonder," he said.

A one-off two per cent efficiency dividend on all departments - bar defence - would save $1.3 billion over the next four years.

That would help to meet the surplus target of 1.5 per cent of gross domestic product Mr Rudd set in January.

"We'll have to make significant cuts to a number of existing government programs to achieve that higher surplus and to reprioritise spending to reflect the nation's greatest needs," he said.

Mr Rudd said he received letters every week from "every corner of the country" about the financial pressures faced by working families.

One woman from Burpengary, north of Brisbane, asked him how people were supposed to survive as prices rose.

"If you buy three litres of milk and a loaf of bread, you've just spent $8," Mr Rudd said, reading from her letter.

"I've said before that there is no silver bullet to provide instant financial relief to those families currently facing these sort of financial pressures.

"But where we can act, it is the government's responsibility to do so."

He set out four principles for the budget - responsible economic management, helping working families, preparing the country for the challenges of the future, and national security.

Fighting inflation was the key, he said, blaming excessive Howard government spending for the "inflation predicament".

"Inflation is not just a number on a page, it is not just a bureaucratic statistic, it is a cancer which eats away at the living standards of all Australians," Mr Rudd said.