Obama signs US debt package

President Barack Obama has signed the bill lifting the US debt ceiling just hours before a deadline to avert the government running out of money to pay its bills.

UPDATE (10am): Moody's reaffirms triple A rating

However, the credit rating agency has assigned a negative outlook.

"The initial increase of the debt limit by $US900 billion and the commitment to raise it by a further $US1.2 trillion to $US1.5 trillion by year-end have virtually eliminated the risk of such a default, prompting the confirmation of the rating at Aaa," Moody's said.

It also said the debt deal is the first step in long-term fiscal consolidation that is the key in maintaining the sovereign rating at triple A.

Moody's warned that the negative outlook indicated that there was a risk of a downgrade if the US fiscal environment weakened further and its economic outlook deteriorated significantly.

Victory for Republicans
Earlier this morning (NZ time), the Senate voted 74-26 to approve sweeping legislation to raise the country's debt ceiling by $US14.3 trillion and cut the budget deficit by at least $US2.1 trillion over the next decade.

The bill is a major victory for Republicans who have long battled to shrink the size of the US government and prevent higher taxes.

However, Republican lawmakers who were opposed to the bill said it didn't do enough to tackle federal deficits, while the Democrats who voted no decried the package for gutting federal programmes aimed at the poor and elderly.

Overall, voting yes were 45 Democrats, 28 Republicans and one independent, while the no votes came from 19 Republicans, six Democrats and one independent.

Obama pledges renewed trade push
Commenting on the bill’s success, President Obama said the debate to raise the nation's debt ceiling was "unsettling" to the economy and he urged Congress to be ready to compromise to further cut spending.

"It shouldn't take the risk of default, the risk of economic catastrophe to get folks in this town to work together and do their jobs," he said.

The president sought to reclaim the domestic agenda to advance his administration's economic agenda.

He urged Congress to pass a slew of measures that he thinks would provide stimulus to the economy, including extending unemployment insurance, trade deals with Panama, Korea and Colombia, and a bill that would restart federal aviation programmes.

Next moves on deficit
The legislation will initially increase the debt ceiling by $US400 billion, followed by potentially two further increases in the borrowing limit in the coming months.

A down payment on deficit reduction of $US917 billion will accompany the first tranche of the increase.

The next step will be selection of a special committee of six Democrats and six Republicans, who will determine a further $US1.5 trillion in spending cuts by November 23.