"The summit will bring together some of the best and brightest brains from across the country to tackle the long-term challenges confronting Australia's future," Rudd told reporters.

With its popularity at risk from rising interest rates and inflation at 16-year highs in the December quarter, the conference is an attempt to paint Rudd's new centre-left Labor government as nation-builders above day-to-day politics.

The conference would be broken into 10 groups, Rudd said, tackling slowing productivity, the digital economy, water management and health, as well as chronic disadvantages suffered by Aborigines, including a 17-year life expectancy gap.

Invitees would include state leaders and the conservative opposition, which was dumped by voters after 11 years in power during elections last November.

Rudd's government has promised to tackle hurdles including rising inflation, which is expected to bring another central bank interest rate hike on Tuesday, placing more stress on mortgage holders in a country where house ownership is an obsession.

On February 13, the government will also deliver an official apology to Aborigines taken from their homes under past assimilation policies, ending a decade-long row over the pace of reconciliation between black and white Australians.

Rudd is also under pressure to maintain the long economic boom and solve state water allocation problems worsening the impact of the drought, which continues to bite many farmers despite good recent rains in some parts of the country.

Experts have warned Australia appears to be suffering from an accelerated climate change, driving up temperatures and bringing potentially catastropic droughts, storms and floods.

"What we want is for this gathering of the nation's brightest and best to put forward options for the nation's future," Rudd said. "Those that we accept will form part of the government's long-term planning for 2009 and beyond."

Treasurer Wayne Swan on Sunday said while Australia had prospered from the long global commodities boom fuelled by demand from China, 16 years of economic expansion had also brought inflation above the central bank's 2-3 percent target band.

"We need a war on inflation and we need to get downward pressure on inflation and downward pressure on interest rates," Swan told local television.

The Reserve Bank of Australia board meets for the first time this year on Tuesday and is expected to raise the cash rate by 25 basis points to 7.0 percent. That would be the third hike in six months and take rates to their highest since late 1996.

Research by JP Morgan and Fujitsu Consulting on Sunday showed around 750,000 Australian homeowners would suffer mortgage stres s this year, a fact which Rudd said he was deeply aware of.

Swan said Australia should be able to head off any global downturn and a US economy showing signs of a recession thanks to continued demand from energy-hungry China.

"What will carry Australia through this is the strength of the developing world, and most particular the strength of Asia," he said. "There is a view out there that a downturn in the US will not necessarily have the traditional impact it may have once had on the developing economies."