Prime Minister Brian Mulroney is expected to launch his second term in office next week with a slimmed-down Cabinet that is expected to set the tone for a more fiscally prudent administration.

The Cabinet overhaul is seen as part of a drive by Canada's Conservative government to control a budget deficit that has come under increased attack.Government sources said reducing the size of the Cabinet is a symbolic move designed to get the message out that Ottawa is serious about paring the $24.36 billion annual shortfall.

"We are going into a period of real restraint and some bullets will have to be bitten," said an informed government source who asked not to be identified.

Mulroney led his Progressive Conservative Party to its second consecutive majority government last November but delayed announcing a new Cabinet until emergency legislation implementing free trade with the United States was passed.