The Abbott government is facing the possibility of a multi-billion dollar hit to budget revenues after the global iron ore price collapsed overnight.

It means Treasurer Joe Hockey's budget repair task could become even tougher, after he endured a $20 billion write-down in forecast tax collections in May.

Treasurer Joe Hockey. Credit:Bloomberg

The global iron ore price plummeted to $US44 a tonne this week - the lowest for recent records - with Australia's major iron ore producers exporting the commodity in record volumes despite weak global demand for it.

The precipitous fall in the price of iron ore has added to a sense of panic in global markets, with China's stock market in seeming freefall and Greece's banking system seizing up after its government defaulted on a multi-billion euro loan from the International Monetary Fund last week.