UPDATE 1-Flaherty to keep finance if Canada shuffles cabinet

* PM Harper considering small shuffle in coming weeks

* Flaherty is a veteran of the recession and G7 meetings

* Aims to return to balanced budget without tax hikes

* Harper expects jobless rate to fall in 2010 (Adds confirmation that shuffle being considered, Harper's expectation on unemployment)

By Randall Palmer

OTTAWA, Jan 12 (Reuters) - Canada's veteran finance minister, Jim Flaherty, will stay in his post in any possible cabinet shuffle, senior government officials said on Tuesday.

"Flaherty will not be moved from finance. He will remain as Canada's finance minister," said one government official, speaking on condition of anonymity.

Flaherty has been finance minister since Prime Minister Stephen Harper's Conservatives took power four years ago. He has been front and center in steering Canada through the recession and is well into preparations for the federal budget for the next fiscal year, due to be unveiled on March 4.

The minister will also host a meeting of the Group of Seven (G7) finance ministers Feb. 5-6.

Prime ministers often change their cabinets early in the new year to freshen them up, and Harper is widely expected to do so this year before a new session of Parliament starts on March 3.

"The prime minister is considering doing a small shuffle," another official said.

In addition to Flaherty staying, Defence Minister Peter MacKay is also expected to remain in his post. He has been under the gun in Parliament over allegations that Canadian soldiers transferred Afghan prisoners to the Afghan authorities in 2006-07 with the knowledge that they might be tortured.

Flaherty will be scrutinized for how he intends to bring Canada's budget back into the black.

His early budgets introduced tax cuts and continued the tradition of surpluses inherited from his Liberal predecessors. The budget then moved to a record deficit for the current fiscal year primarily because of spending measures taken to try to fight the recession.

He has promised not to raise taxes and not to make major spending cuts, aside from letting economic stimulus programs expire. He also has said Canada should be able to return to a surplus in several years, but some question if this is possible.

Economic growth has been tepid so far and unemployment has remained high in the range of 8.5 percent. Harper said in an interview with Toronto's Newstalk 1010 radio broadcast on Tuesday that the unemployment rate should improve in 2010.

"We're not going to be happy until we start to see that number come down again, and we're optimistic that's what will occur in the year to come," he said. (Editing by Peter Galloway)