OTTAWA - Finance Minister Jim Flaherty says he's worried about the volatility of the Canadian dollar but does not see it as a sufficient threat to his policy of not raising taxes.

The finance minister said Wednesday he agreed with Bank of Canada governor Mark Carney's views and approach in dealing with the surging loonie.

On Tuesday, Carney said the dollar was harming the economy and hinted strongly that he was prepared to keep the bank's policy interest rate at the historic low of 0.25 per cent until at least next summer.

The dollar dropped two cents on the comments, but was up again 0.43 cents Wednesday to 95.6 US cents on a gain in oil prices.

Flaherty said he never believed the economy would bounce back strongly from the recession, and so far is being proven right.

"Our economy has stabilized but we have not seen evidence of firm, significant, entrenched economic growth in Canada," he said during a scrum with reporters after question period in the Commons.

The central bank predicts the economy will grow by three per cent next year and 3.3 per cent in 2011 -- the latter number slightly lower than it had expected a few months back when the loonie was expected to average about 87 cents US.

Flaherty said the main obstacle to a robust recovery remains the weakness of U.S. demand, and contrasted Canada with Australia, which recently began raising interest rates.

"This is not Australia," he stressed. "Australia has an economy that will grow something like four per cent this year, but their major trading partner is China (which has a seven per cent growth). Our major trading partner is the United States and the United States economy is going through a very difficult time."

Despite the damage being done by the loonie, Flaherty said he does not anticipate it will be sufficient that he will need to go back on his promise not to raise taxes or to slash program spending.

On Wednesday, the TD Bank said in a report that federal and provincial governments will end up $90 billion in the red this year and that they cannot depend on growth alone to balance budgets in the future.