Treasurer Peter Gutwein on Sunday warned the government has had to make some difficult decisions regarding the upcoming state budget.
He said on Sunday the state had been hit by a $500 million revenue write-down from what was included in the current budget with a big chunk taken out of Tasmania's GST share and stamp-duty revenue.
Mr Gutwein was tight-lipped as to whether the upcoming state budget would be in surplus.
"I'll have more to say about the forward estimates when the budget is brought down on Thursday," he said.
"This budget has been a challenge to put together.
"There has been some challenges that we've had to overcome and difficult choices we have had to make.
"The key challenge with this budget is we know that there will be headwinds in the national economy and we know that our economy is strong at the moment so it will be about maintaining that strength. That is the engine room that will generate the revenues we need to provide essential services."
Mr Gutwein said he would protect the public sector's frontline workforce but hinted at efficiency savings in the broader sector.
"We'll have to become more effective and more efficient in what we do," he said.
The government's current wages policy of a 2 per cent cap on the public sector workforce has been included in the budget as the government is yet to reach a formal agreement with any union.
"As we've made perfectly clear, where there are increases above the 2 per cent, we'll have to offset that in savings," Mr Gutwein said.
He said the budget would sustain the course on infrastructure investment as well as investment in essential services to meet demand.
"Investment in infrastructure is job-creating at it attracts addition private sector investment into the economy as well," Mr Gutwein said.
"We see that as a key plank in the budget moving forward."