A slump in Victoria's property market means less money in state coffers and a pay rise limited to two per cent - below inflation - for public servants including police and paramedics.
Treasurer Tim Pallas on Tuesday said while the economy was still strong, the level of income had changed.
"We don't see it as a negotiation, it's simply a pure exercise in mathematics here and it's what the state can do," Mr Pallas said when asked if the state would stretch beyond a two per cent pay increase.
"People do need to appreciate that the state's revenue is being compromised, in part due to the adjustment that's going on in the property market."
Mr Pallas said election promises were "sacrosanct" and would go ahead as planned, there were no plans for austerity measures, and he did not anticipate the downturn affecting increased borrowing he had already flagged.
Opposition Leader Michael O'Brien accused the Labor government of spending money like water.
"Inflation is usually a starting point, that's keeping pace with cost-of-living and then if you get better productivity you get better outcomes for the public, then public servants deserve a pay rise beyond that," he told reporters.
