Australia's navy this morning intercepted a ship carrying 87 people near an offshore island, most of them suspected asylum seekers, a government minister said.

The ship carrying 83 passengers and four crew was stopped near Ashmore Island, a small possession north of the Australian mainland, Home Affairs Minister Brendan O'Connor said in a statement.

People-smuggling is a hot political issue in Australia and the conservative opposition has accused Prime Minister Kevin Rudd's Labor government of going soft on the subject.

Critics say this has fuelled an upsurge in arrivals this year.

O'Connor said the latest arrivals would be transferred to Christmas Island, an Australian possession in the Indian Ocean where the government has a processing centre for asylum seekers. He rejected criticism of the government's stance.

"Situations around the world mean that large numbers of displaced persons are looking for settlement in wealthy, developed nations like Australia and can be targeted by, and fall prey to, people smugglers," O'Connor said in the statement.

"The Australian government remains vigilant and committed to protecting Australia's borders and today's incident demonstrates the effectiveness of the proactive surveillance programme in place."

Most of the often ramshackle boats arrive from neighbouring Indonesia and there have been several fatal incidents. The asylum-seekers are mostly from war-ravaged countries like Afghanistan, Iraq and Sri Lanka and have often spent years in resettlement camps.