UPDATE: FORMER Victorian Labor minister Tim Holding has announced his retirement from politics.

"I'm announcing today that I'm stepping down as shadow treasurer and shadow minister for industry, and I'm also announcing that I'm retiring from today as the member of parliament for Lyndhurst," Mr Holding told reporters in Melbourne.

Mr Holding, who said he had made his decision in the last two weeks, ruled out a tilt at federal politics and said he was taking time off to consider his future.

Mr Holding said it had been a great honour to represent the Labor Party in the Victorian parliament and to have served as a minister for eight years in several portfolios under the Bracks and Brumby governments, and in opposition as a shadow minister.

Mr Holding said he had made the decision after careful consideration and had not been offered nor sought another job.

"I've been in public life almost continuously for more than 20 years. I've given everything that I have to serving in public life," he said.

"I believe the time has now come for me to do other things with my life."

Mr Holding said he believed Labor's prospects at the next election are very good.

"It's for that reason that I had to make a decision now as to whether I had it in me to serve as a minister for the full four years in the next term of government, when I believe Labor will be returned to office," he said.

"If I didn't have it in me, then I had to say so now, it was the fair thing to do for my colleagues to give them a chance to select the team they'll take to the next election."

Mr Holding said he was proud of the $5.7 billion desalination plant as part of his legacy in government - despite criticism of the massive cost of the project - saying it will stand the test of time.

"Victorians are not fools, they know our population is growing, that our climate is changing and the drought will come again," he said.

"We will use the water from this plant in years ahead and when we do, this water will save the people of Melbourne."

Mr Holding said he'll spend the next few month deciding what the next stage of his life will involve, though it won't be politics.