Tasmania's public servants face a pay freeze with the state's budget deficit more than doubling.
New treasurer Peter Gutwein says the net operating balance for 2013/14 was meant to be a deficit of $157.4 million.
Instead, a report released on Tuesday predicts a deficit of $398.7 million.
Mr Gutwein admitted he faced a very tough situation but would not deliver a "slash and burn budget" on August 28.
Instead Tasmania's 27,000 public servants face a "pay pause", which will save about $50 million a year.
He said public sector wages are $153 million more in 2013/14 than were forecast just three years earlier.
"This makes the case for public sector wages to be reined in," he said.
"The only two ways to do this are either significant job losses or a pay pause, which is why the Liberal government has proposed a pay pause."
Mr Gutwein also ruled out backing out of any of its $500 million in election promises or tax increases.
Opposition Leader Bryan Green said the new government had over-promised to end 16 years in opposition, and now had to break some of those promises.
"They need to recant from those $500 million worth of promises, otherwise they will lead Tasmania into a debt crisis as well as a revenue crisis," he said.
CPSU acting general secretary Mat Johnston said public sector workers were bitterly disappointed by the pay pause and the government's suggestion it would stop job losses was a myth.
"It's bad news for Tasmanian families, it's bad news for Tasmanian businesses who will suffer from people not spending their discretionary money because they are pulling their heads in," he said.
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