Friends First economist Jim Power has called on Finance Minister Brian Cowen to make changes in stamp duty.

In his latest economic outlook, he says the top rate should be cut from 9% to 6%, with thresholds indexed each year in line with projected house price inflation.

The economist describes the background to the Budget as 'the most challenging in over a decade'. This is due to slower growth in tax revenues, the slowdown in housing activity and more uncertain conditions in the world economy.

Mr Power said a proper restructuring of stamp duty would ensure that the tax take would be maintained.

He added that there were now grounds for concern about the labour market following recent job losses, and wage restraint was becoming more important.

The economist predicted that average house prices would drop by around 7% this year, with a 5-10% fall in 2008. He is predicting GDP growth of 3% next year.