US President Barack Obama has signed a bipartisan federal budget bill, averting the risk of an embarrassing government shutdown for two years in the world's largest economy.

Obama also approved a defense spending bill that includes provisions altering the way sexual assaults are handled in the military. The measure also makes it easier to transfer detainees out of the Guantanamo Bay detention facility in Cuba.

The hard-fought legislation was passed by both the Senate and the House of Representatives earlier this month. The bill had been drafted by a cross-party budget committee set up after October's 16-day government shutdown.

It outlines federal spending through 2015, meaning the government will remain open for the foreseeable future. A government shutdown at the beginning of October cost the US government millions of dollars, and left a large swath of the federal workers at home.

Obama signed the bills yesterday while vacationing in Hawaii.

Obama said since taking office, he has repeatedly called upon the Congress to work with his Administration to close the high-security terrorist detention facility at Guantanamo.

"I am encouraged that this act provides the executive greater flexibility to transfer Guantanamo detainees abroad, and look forward to working with the Congress to take the additional steps needed to close the facility," Obama said.

"The continued operation of the facility weakens our national security by draining resources, damaging our relationships with key allies and partners, and emboldening violent extremists," he said in a statement.

The sweeping defence bill among others, authorises USD 527 billion in base defence spending and USD 80 billion for the war in Afghanistan, in addition to a crackdown on sexual assault in military and eases restrictions on transferring detainees from the federal prison at Guantanamo Bay.

In possibly his last official act of the year, the bipartisan bill crafted by Congressman Paul Ryan and Senator Patty Murray authorises more than USD 1 trillion in spending for fiscal 2014 and 2015, and creates a detente between the parties by avoiding both entitlement cuts and tax increases.

It replaces USD 63 billion in sequester cuts over two years, in part by cutting benefits for new federal workers and military retirees and by raising fees on airlines tickets.

"This law is proof that both parties can work together," Ryan said in a statement.

Congressman Howard P "Buck" McKeon, Chairman of House Armed Services Committee, welcomed the signing of the 52nd National Defense Authorization Act into law.

"The law makes important reforms to the Uniform Code of Military Justice, taking steps to heal the scar of sexual assault within the ranks," he said.