Mr. Flaherty, speaking to a business audience, said the government plans to get back to a balanced budget "during the current parliamentary term and certainly before the next election."
He said the government will not reduce transfers to provinces and territories for education and healthcare, that makes up about one-third of the budget. Nor will the government touch spending to individuals like seniors, people with disabilities and children, another third of the budget, he added.
So, Mr. Flaherty said, the government is left to focus on the final third of the budget – program spending.
The government's latest deficit projections, released last week, show a deficit of $26 billion – up $5 billion from the budget forecast last March, due to global economic weakness that has cut into commodity prices and tax revenues.
The gloomy numbers prompted the federal government to delay its hopes of balancing the books until 2016-2017, a year later than previously forecast, however both Mr. Flaherty and Prime Minister Stephen Harper have insisted the government can still balance the budget by 2015.
Budget consultations will begin next week, Mr. Flaherty said.
He noted that Canada continues to outperform its peers in economic measures like job creation, but said there are still numerous challenges from outside its borders – the most immediate of which being the U.S. looming "fiscal cliff," a series of tax hikes and spending cuts set to take place in the new year if politicians can't agree to an alternative plan.
If U.S. lawmakers cannot agree on a budget plan before the deadline the tax hikes and spending cuts threaten to return the U.S. back into recession and potentially drag Canada down.
"We can't afford to be complacent, this is especially true in the case of volatility in the world economy," Mr. Flaherty said.
With the global economic recovery progressing slowly and threatened on several fronts, the minister did say he's prepared to be flexible if needed, but his plan is to stick to "balanced budgets and low taxes."
"I'm not going to raise taxes on business, large or small, that will make it hard for a company to expand at a time when too many Canadians are still looking for a job," Mr. Flaherty said in prepared notes.
"I'm not going to create new programs that will bloat bureaucracy at the expense of our health and education systems that our children and grandchildren will rely on."
Mr. Flaherty touted moves made in the budget last year that have helped reduce the deficit, such as the federal government's move to increase the eligible age for old age security, reducing the amount it contributes to public sector pensions and aggressively reducing tax loopholes.
"I know we're being fairly successful at that from some of the notes I get from people on Bay Street ... I find some of them are not in the Christmas spirit," he joked to the Toronto Board of Trade crowd.
Mr. Flaherty said the government is trying to strike a balance between reducing spending, maintaining an "appropriate tax base" and including some measures to stimulate economic growth.
He also mentioned the government will soon announce details on a venture capital program that will be led by the private sector. Other areas of focus he mentioned include renewing the country's infrastructure and expanding trade relationships from beyond the U.S. and commitment to tax breaks for small businesses that hire to stimulate job creation.