DUBAI, Sept 27 (Reuters) - Saudi Arabia's main stock index tumbled 3.0 percent in early trade on Tuesday after the government said it would cut ministers' salaries by 20 percent and scale back financial perks for public sector workers under an austerity drive.

The new steps largely appear to formalise spending reductions introduced on an ad hoc basis since last year, and they will not by themselves make a huge difference to the government's deficit. NCB Capital estimated allowances accounted for about a quarter of the government's total salary expenses last year, which were 38 percent of its overall budget.

Nevertheless, the announcement underlined the bleak outlook for government spending, which is a key driver of consumption.

All traded shares declined in first half-hour with the retail and insurance sectors hard hit. Luxury goods retailer Fitaihi dropped 5.2 percent and bookstore operator Jarir Marketing slumped 3.8 percent.

The insurance sub-index retreated 4.6 percent; the sector is chiefly traded by local retail investors.

Banking shares, which had rallied on Monday, erased some of those gains with National Commercial Bank down 1.7 percent.

(Reporting by Celine Aswad; Editing by Andrew Torchia) ((celine.aswad@thomsonreuters.com; +971562247653))