"This is R8.1 billion over what we have budgeted for," she told reporters in Pretoria.

"We will need to go into our reserves." Sisulu said government had offered public service workers a nine percent increase made up of a 6.5% salary increase and a 2.5% increase in benefits.

Labour was demanding an eight percent salary increase.

Negotiations broke down last week when government made its final offer. The unions have declared a wage dispute.

Sisulu said Treasury had budgeted for only a five percent increase.

"Government [is] in a situation where nine percent is way above what it has budgeted for," she said.

Salary increases higher than the rate of inflation would be unsustainable.

Sisulu said government was inviting labour back to the negotiating table.

"They will be surprised that I have no horns and there is no devil in me," Sisulu told reporters in Pretoria.

"It is in their interest that we find an amicable solution." Sisulu denied reports that she was a "union basher".

This related to her stance on unions within the SA National Defence Force.

"As far as the ruling party [ANC] is concerned, and the policy of the defence force, there is no place for unions in the defence force," said Sisulu.

"There is no place in the defence force for ill-discipline." She was referring to striking defence force officers who went on the rampage at the Union Buildings in Pretoria in 2009.

Sisulu was moved from defence to public service by President Jacob Zuma during a Cabinet reshuffle last week.

She said that, on average, seven months a year were spent negotiating with public service workers.

"I don't believe this is right."

She said a service charter was needed which would deal with, among other things, salary increases based on performance.

The charter would be necessary for government to function properly.

"We cannot go on like this with a wage bill that is unaffordable.

"After a series of negotiations we are at a point where we can influence and talk to labour so that we can find each other," said Sisulu.