The US Senate has approved legislation aimed at averting the “fiscal cliff” by stopping most tax hikes and across-the-board spending cuts that were due to begin with the new year.

The deal was approved early on Tuesday, about two hours after the midnight deadline at which the automatic tax hikes and spending cuts came into effect.

Al Jazeera’s John Terrett, reporting from Washington DC, said the 89-8 vote sent the measure to the House of Representatives, which was scheduled to meet later on Tuesday to consider it.

“I do want to stress that there will not be a law on this until the people’s house, the House of Representatives, votes on it and they are not going to convene until 17 hours GMT on Tuesday, January 1,” our correspondent said.

“So we have an important signal coming out of the Senate right now but no law until the House votes and it is not certain – though I think it is probably likely – until the House votes.”

Late on Monday, the White House and congressional legislators reached the agreement to avoid the “fiscal cliff” that would delay harsh spending cuts by two months, an Obama administration source said.

Democratic Senate Majority Leader Harry Reid and House of Representatives Minority Leader Nancy Pelosi have also reportedly signed off on the agreement, which would extend Bush-era tax cuts for family incomes below $450,000.

The agreement includes a balance of spending cuts and revenue increases to pay for the delay in the automatic spending cuts that would go into effect without a deal.

Of those spending cuts, 50 percent would come from defence and 50 percent from non-defence areas.

Terrett said, “We’ll be back here in two months’ time dealing with the issue of sequester, budget cuts and the debt ceiling.”

Our correspondent added, “Yet the vote sends a signal around the world that, when push comes to shove, there is finally an agreement – even if it’s New Year’s Eve.”

‘Issues left to resolve’

Earlier, the US president had said a deal on the “fiscal cliff” was within sight, but that it was not completed yet.

Speaking to an audience of middle-class taxpayers at the White House, Obama on Monday said the deal would extend unemployment benefits for Americans “who are still out there looking for a job”.

Under the Senate plan, those with a household income above $450,000 or individual income above $400,000 would be taxed at 39.6 percent, up from 35 percent.

Republicans, who control the House of Representatives, have been against raising taxes on the rich, while the Democrat-controlled Senate and the White House have been averse to spending cuts.

Meanwhile, the country’s chronic deficit spending – about $1tn a year – continues without a deal to address it.

Without a deal, the nation could lose up to 3.4 million jobs, the Congressional Budget Office has predicted. And budget cuts of up to 9 percent could hit most of the federal government.

And if the limit were not raised on how much the government can borrow, reaching the $16.4tn debt ceiling could lead to a first-ever default in February or March that would shake worldwide confidence in the United States.

On top of that, the current Congress is in session only through mid-day on January 3. After that, a freshly elected Congress with 13 new senators and 82 new House members will inherit the problem.

The uncertainty has weighed on financial markets and forced businesses to slow hiring and investment.