Danny Williams said the possibility of large deficits make 'the whole question of collective bargaining a big issue.' (CBC)

Newfoundland and Labrador Premier Danny Williams warned Tuesday that the government's wage offer to public sector unions could get smaller if the province's financial picture gets any worse.

Williams said that with oil below $60 US and given his earlier warning of future deficits, an offer of more than 20 per cent over four years could change quickly if unions such as the Newfoundland and Labrador Association of Public Employees and the Newfoundland and Labrador Nurses' Union don't take it.

"You know if we get into several-hundred-million-dollar deficits, then that makes the whole question of collective bargaining a big issue," he said, answering reporters' questions after the first day of the fall session of the House of Assembly.

"If, in fact, eight, four, four and four [per cent increases over four years] across the board is going to add $500 million to the bottom line, and we are going to run a $500 million deficit, then that is something we prudently would have to look at."

Williams said the economic situation will not affect the CUPE deal, which is the only major union contract to be completed so far.

When it was reached last April, Williams called the CUPE deal the template for the other public sector unions, saying it was as much as his government could afford.

Contacted by CBC News on Tuesday, the Newfoundland and Labrador Teachers' Union said they are in the middle of negotiations and declined to comment.

Others, such as the nurses' union, said they will have something to say on Wednesday.