The national deficit hit a record $55.6 billion in the last fiscal year, though Finance Minister Jim Flaherty says he is confident that the government will be able to balance its budget in 2015-2016.

Using belt-tightening measures that the government introduced in the last budget, Flaherty said Ottawa expects that its deficit will steadily decrease each year.

In the 2011-2012 fiscal year, Flaherty said the deficit is projected to be $29.8 billion, dropping to $1.7 billion by 2014-2015. After that, the government expects to see a $2.6-billion surplus in its annual budget.

"We're going to stay on track, we've made those assumptions on our fiscal track going forward," Flaherty told CTV's Power Play on Tuesday evening. "And as I say within a few years, in the medium term, we'll be down to a small deficit and then balance."

The finance minister delivered his fall economic update to a group of business professionals in Mississauga, Ont. He told the group earlier Tuesday the International Monetary Fund has projected that the fiscal position of Canada's many federal, provincial and local governments will be "broadly balanced" by 2015.

According Flaherty, the record deficit can be blamed on two factors: a one-time $5.6 billion payout to British Columbia and Ontario to assist with the transition to the harmonized sales tax, and the government's recent decision not to hike Employment Insurance premiums as much as originally planned.

The $55.6 billion deficit is $1.8 billion higher than what the government predicted in March, and a whopping $10 billion more than the previous record, set in the early 1990s.

As recovery from the recession slows, government revenues will dip, according to the update. Growth slowed to 1.8 per cent in the third quarter and will hover around 2.5 per cent in the next three quarters, as a weak U.S. economy dampens Canadian export activity and the housing market continues to cool.

While the update included no new spending or cost-cutting measures, Flaherty said the government is committed to slicing its spending via measures already underway, including freezing government administrative costs and restricting the growth of several federal departments.

Flaherty also pointed out that the Economic Action Plan ends early next year.

"One can be Draconian and cut this expense and cut (others)," Flaherty told Power Play. "Not a good idea. We've got a fragile economic recovery. We've got to keep the economic recovery going, so we have to be careful and very prudent in how we budget over the course of the next several years."

Flaherty remained vague when asked how promised 6 per cent increases in health-care transfers to the provinces fit into higher deficits.

He would only say that "no decisions have been made about any of those items by any governments involved."

Flaherty also wouldn't say whether the new deficit figures preclude the government from offering tax cuts in next spring's budget.

He pointed out that some tax cuts introduced within the Economic Action Plan are permanent, and that business tax cuts are still set to take effect in 2011 and 2012.

"We'll see. We'll monitor the economy," Flaherty said. "We believe in low taxes and controlling spending in our government and we've shown that over the course of four-and-a-half years now. We've stayed on that plan."

With files from The Canadian Press