Protesters clashed with riot police outside Argentina's Congress building as politicians approved President Javier Milei's contested economic reforms, which he says are needed to undo a major financial crisis. 

The disturbances, late on Wednesday local time, saw demonstrators set fire to cars and hurl Molotov cocktails, rocks, and bottles at riot police.

Footage showed at least two vehicles alight and smoke engulfing Central Square, while armoured officers sprayed water cannons and tear gas to help subdue the crowd. 

Authorities reported least 20 police officers injured and more than a dozen people arrested over the violence.

The demonstration was staged in a show of fierce opposition to Mr Milei's radical right-wing reform program, as the nation grapples triple-digit inflation, high debt, and depleted central bank reserves.

Unaffordability peaks as more than half of Argentines in poverty

Argentina's inflation rate fell to 276 per cent in May from the previous high of 292 per cent in April.

Inflation has sat above 100 per cent for more than a year, and has been steadily rising since the middle of last year.

Mr Milei rose to power on promises he would resolve what is Argentina's worst economic crisis in two decades. 

But his political party of relative novices holds just a tiny minority of seats in Congress, struggling to strike deals with the opposition.

“We have the weakest president we’ve ever seen who is trying to pass the biggest bill we’ve ever seen,” said Ana Iparraguirre, an Argentina-based analyst at Washington strategy firm GBAO.

"That's the contradiction."

For the Argentines, more than half of whom now live in poverty, the biggest point of contention is plans for reduced government spending.

Using executive powers, Mr Milei has slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket and spreading economic misery. 

Declining monthly inflation means little to citizens, who say their low wages remain stagnant while the cost of goods and services reaches levels seen in American and European cities.

"A year ago I had a completely different life, I could travel, I could eat well," Vivi Rola, a 69-year-old teacher, told reporters in downtown Buenos Aires.

What's in Javier Milei's controversial austerity bill?

Mr Milei's proposed austerity legislation hung in the balance after 11 hours of heated debate in parliament, passing by just one vote.

Upper house senators must still approve individual measures in an article-by-article vote.

The legislation delegates broad powers to the president in energy, pensions, security and other areas and includes several measures seen as controversial.

A generous incentive scheme for foreign investors, tax amnesties for those with undeclared assets, and plans to privatise some of Argentina's state-owned firms are among the most disputed.

Having hitched his political fortunes to the goal of cutting down Argentina's bloated state, Mr Milei hailed the vote as a "triumph" and "the first step toward the recovery of our greatness".

Even so, opposition senators scrapped an income tax package and watered down other parts of the bill. Those changes will now have to be approved again by the lower house.

In a reflection of the fierce backlash to the legislation and deep polarisation gripping Argentina's Congress, vice-president and Senate leader Victoria Villarruel cast the tiebreaking vote in favour of Mr Milei's agenda.

"Today there are two Argentinas," Ms Villarruel said as she voted in favour of the reform. 

"A violent Argentina that sets a car on fire, throws rocks and debates the exercise of democracy, and another Argentina with workers waiting with great pain and sacrifice for the change that they voted for."

Reforms face domestic pushback but fare well in international markets

Senate backing will prove critical for Mr Milei, an economist and former pundit who took office in December pledging to overhaul the embattled country's economy.

It signalled his ability to win over conservative and centrist allies, despite devaluing the currency after assuming office and sending inflation soaring towards 300 per cent. 

Mr Milei is the only leader since Argentina's return to democracy in 1983 not to pass a law within his first six months as president. A defeat would have pitched his government into crisis.

The left-leaning Peronist movement, aligned with former president Cristina Fernández de Kirchner, decried the bill's passage as the latest political catastrophe for Argentina, which has been shaped by its brutal military dictatorship in the late 1970s.

"We were able to overcome the dictatorship, and surely this is going to be a new, different challenge," said Agustín Rossi, Ms Kirchner's former chief of staff.

Analysts say the passage of the legislation signals a sharp reversal from Peronist administrations that ran vast budget deficits.

Argentina's international dollar bonds saw an immediate boost the morning after the laws were passed.

Sovereign bond yields jumped 3.5 per cent on the news.

The Argentine peso dipped to 1,220 against the US dollar on the black market, narrowing the gap between the official and informal exchange rates.

China will also be a key player in helping ease fiscal pressures and free up treasury reserves, with the International Monetary Fund expecting it to reschedule billions in Argentina's debt repayments to start from next year.

ABC/AP/Reuters