INTEREST rates could fall further as a result of the Federal Government's plan to return its Budget to the black, Wayne Swan says.
The Treasurer has also flagged cuts to Government spending in the May Budget, in areas where private providers could step in.
The Government has attracted criticism from some economists and interest groups for its vow to cut spending to ensure it delivers a Budget surplus next financial year.
But, in a new defence of his Budget plan, Mr Swan said a surplus would give the Reserve Bank of Australia more room to cut official interest rates.
In his weekly economic note, Mr Swan said it was time for the Government to step back from some of the extra spending it rolled out in aftermath of the global financial crisis.
"Just as it was right to step in and support demand when it was needed, it's right now to be stepping back to provide space for the private sector to grow and to ensure the Reserve Bank has the flexibility to cut interest rates further if it thinks that is necessary,''he said in the note.
"This is a key reason why getting the Budget back to surplus in 2012-13 is an economic imperative.''
In order to deliver a surplus, the Federal Government will be forced to make unpopular cuts.
In its most current forecast, the Government says that it plans to deliver a slim, $1.5 billion surplus next year, but that tax revenue had fallen since these projections were made late last year.
At the same time, the Government is also set to deliver a significant funding boost to intensive care needed by dementia patients as part of a shakeup of aged care.
The additional funding will aim to boost the ability of dementia patients to stay in their homes, to slash waiting times, to provide access to community care workers and lift training standards in aged care facilities.
Aged Care Minister Mark Butler has backed a new report by Alzheimer's Australia, to be released today, which finds the aged care system is failing to meet the needs of people with dementia. In a move that highlights a key part of the aged care package that is likely to be a centrepiece of the federal Budget, Mr Butler said the needs of dementia patients were among the most pressing areas needing reform.
"Families want to keep loved ones living with dementia at home for as long as possible, but the current system does not provide adequate support and assistance to enable people to remain at home,'' Mr Butler said.
"Community care packages on offer are inadequate and inflexible. Long waiting times, lack of transparency in administration costs and artificial barriers in what services can and cannot be provided often leave families feeling confused.''
The Alzheimer's Australia report found widespread problems with the quality of dementia care as well as lengthy delays with diagnoses.
Read more on The Courier Mail.