He also promised to forge a new and comprehensive strategy with US' allies to defeat Al-Qaeda and combat extremism.

"With our friends and allies, we will forge a new and comprehensive strategy for Afghanistan and Pakistan to defeat Al-Qaeda and combat extremism," Obama said in his maiden address to the joint session of the US Congress.

"I will not allow terrorists to plot against the American people from safe havens half a world away," he said. As his administration is carefully reviewing its policies in Afghanistan and Iraq, Obama said: "I will soon announce a way forward in Iraq that leaves Iraq to its people and responsibly ends this war."

Obama said his administration will eliminate the no-bid contracts that have wasted billions in Iraq and reform the country's defence budget "so that we're not paying for Cold War-era weapons systems we don't use."

He said for the first time this year's budget looks ahead 10 years and accounts for spending that was left out under the old rules -- and for the first time, that includes the full cost of fighting in Iraq and Afghanistan.

"For seven years, we have been a nation at war. No longer will we hide its price," he said.

On foreign policy, Obama promised to the international community that a new era of engagement has begun with the advent of his administration.

"In words and deeds, we are showing the world that a new era of engagement has begun," he said in his joint address to the US Congress. For we know that America cannot meet the threats of this century alone, but the world cannot meet them without America," he said.

"We cannot shun the negotiating table, nor ignore the foes or forces that could do us harm. We are instead called to move forward with the sense of confidence and candour that serious times demand," he said.