Victoria faces hard economic choices as state stamp duty cash-flow continues to plunge on the back of the slowing housing market and there could be more bad news to come, Treasurer Tim Pallas has warned.

Government workers need to adjust their wage demands, Mr Pallas said on Tuesday, with very few state assets left that could be sold to bolster the budget bottom line.

The slowing housing market has crimped Victoria's stamp duty revenue. Credit:Glenn Hunt

Public sector unions are reportedly unhappy that a 2 per cent pay rise has been proposed by the state government for tens of thousands of police, health workers and public servants, saying such an offer would fall short of cost-of-living increases.

But a dramatic fall in the number of house and apartments sales had already lead to a write-down of more than $600 million in stamp duty revenue this year and there could be more pain to come, Mr Pallas warned.