Finance Minister Jim Flaherty says he'd allow the federal deficit to grow to protect jobs and the economy if Canada falls victim to another global economic crisis.

But Flaherty adds the Canadian economy is on the right track, and growing faster than other G7 countries.

The finance minister's words follow the release today of the Finance Department's Fiscal Monitor, which says the budget is closer to balance than it was a year ago.

But it warns that its solid fiscal performance may not last.

The Fiscal Monitor says the deficit for the first three months of the 2012-13 fiscal year was $2 billion — less than half the $4.2-billion recorded for the same period last year.

2012/13 deficit projected at $21.1B

The department says that's consistent with its plan to reduce the 2012-2013 deficit to $21.1 billion.

But it also warns that a weak economy poses a mounting risk for the fiscal situation — and Flaherty is signalling the government is prepared to step in as it did in the wake of the 2008 recession to shore up the Canadian economy.

"What has been done before can be done again," Flaherty said in Toronto on Friday.

"If we ran into a serious world economic crisis arising out of the European situation, or something else... then of course we'd be responsive if we had to be to protect the Canadian economy and protect Canadian jobs as we have done in the past."

In early 2009, the federal government pumped up spending by about $50 billion over two years through tax cuts, income supports and fast-tracking infrastructure projects, among other measures, to limit the damage of the global recession.

Even so, the country fell into a nine-month recession and lost about 430,000 net jobs before halting the slide.

From April to June, federal revenues rose 4.7 per cent because of higher income tax payments and a hike in the Employment Insurance rate, while expenses rose at a more modest pace.

For the month of June alone, the deficit was $1.1 billion, compared with $2.3 billion for June 2011.