The Italian parliament has approved its austerity package by a vote 321 to 270 votes.

The bill, which has proved unpopular with a wide range of workers, is aimed at cutting the country's budget deficit.

Sponsored by the government of Silvio Berlusconi, the lower house of parliament approved the $32 billion bill on Thursday, two weeks after senate approval.

The measures include a three-year salary freeze for public workers; a 10 per cent cut in ministry budgets; less funding for local government and more policing of tax evaders.

Over the past weeks, Italy's largest union has sent its members out over the measures.

As an indication of how unpopular the bill is with the entire working community, magistrates, doctors and diplomats have also protested in the streets.