ABC News - Melbourne's property slump looks like bad news for public servants looking for a pay increase

The property downturn is forcing the Andrews Government to tighten its belt ahead of pay negotiations with tens of thousands of Victorian workers, including police and paramedics.

Several public sector workplace agreements expire this year with negotiations on many, including for 4,000 paramedics and ambulance support staff, set to begin soon.

Treasurer Tim Pallas met with union bosses recently and senior sources said he offered them 2 per cent a year for new enterprise bargaining agreements, which is below the current cost of living increase.

It is understood union officials were unimpressed with the proposal, with some saying it was highly unlikely they "would cop something below the cost of living".

The 2 per cent offer is due to the slump in house prices, which have dropped by more than 9 per cent in the last year.

A Government spokesperson said Mr Pallas met unions on a regular basis.

"In line with longstanding practice we don't divulge those private conversations,'' she said.

"The Treasurer has already foreshadowed a reduction in stamp duty revenue following a cooling of the property market — that will not stop the Government honouring all of its election commitments in full."

Stamp duty and property taxes are the biggest tax revenue for the state, while public sector wages are the biggest expense.

Last December's mid-year budget update revised stamp duty taxes down $604 million to just under $6.5 billion, since then the property market has continued to slow.

In its first term the Andrews Government delivered significant pay rises for some in the public sector, including some double digit increases, with nurses securing a seven-year deal.

A campaign on wages, with the slogan Australia Needs a Pay Rise is also part of the Australian Council of Trade Unions Change the Rules campaign for the upcoming federal election.

Last year, Mr Andrews joined union leaders at the front of a mass rally of workers in Melbourne that shut down the city demanding better pay and work conditions.

The Andrews Government is yet to officially set a public sector wages policy.

Since winning office in 2014, the Andrews Government has enjoyed healthy budget surpluses propelled by soaring Victorian property prices.

But with the housing market drop, stamp duty and property taxes, coupled with record government spending has created a difficult budget period for the re-elected Andrews Government.

Union secretaries did not comment when approached by the ABC.

Impact on budget bottom line

There are more than 20 public service agreements due to expire this year, covered by the Community and Public Sector Union.

The deal for early childhood workers expires in July but the current agreement with state teachers will last until 2021.

Other agreements expiring this year include firefighters and public transport workers.

The Real Estate Institute of Victoria chief executive Gil King said property taxes represented 47 per cent of Victoria's tax income, which had underpinned the state economy for the past decade.

"It's really been the equivalent of WA's mining boom," he said.

Mr King said sales volumes were at their lowest levels in six years, with a 35 per cent decrease in the number of house and unit sales comparing the December 2017 quarter to the December 2018 quarter.

"Fewer sales should be of concern to the Government as it translates to reduced levels of stamp duty and other property taxes which are a major contributor to the budget bottom line," Mr King said.

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