Obama paints hopeful picture in final State of Union address

President Barack Obama today used his final State of the Union address to paint a hopeful portrait of America under his leadership, with a resurgent economy and better standing in the world despite racial inequality and growing menace of home-grown terrorism.

He also used the occasion to hit out at Republican presidential candidates like Donald Trump, who has proposed to temporarily bar all Muslims from travelling to the US.

"We need to reject any politics that targets people because of race or religion," Obama, the first ever African-American President, said in his hour-long prime-time speech marked with applause for as many as 64 times.

"When politicians insult Muslims, when a mosque is vandalised, or a kid bullied, that doesn't make us safer," he noted.

"That's not telling it like it is. It's just wrong. It diminishes us in the eyes of the world. It makes it harder to achieve our goals. And it betrays who we are as a country," Obama said, adding that a better politics doesn't mean one has to agree on everything.

"This is a big country, different regions, different attitudes, different interests," he said.

"That's one of our strengths, too," he added.

"This isn't a matter of political correctness. This is a matter of understanding just what it is that makes us strong. The world respects us not just for our arsenal, it respects us for our diversity and our openness and the way we respect every faith," he said.

Obama said "one of the few regrets" of his presidency was that - after he ran on a message of unity and healing - American politics had become more divided and resentful on his watch.

"It's one of the few regrets of my presidency, that the rancour and suspicion between the parties has gotten worse instead of better," he said, in his final State of the Union address.

Warning that "instability will continue for decades" in many parts of the world including Afghanistan and Pakistan, Obama said both al-Qaeda and ISIS pose a direct threat to the US and America's foreign policy has to be focused on the threat from ISIL and Al Qaida.

"Our foreign policy must be focused on the threat from ISIL and Al Qaeda, but it can't stop there. For even without ISIL, instability will continue for decades in many parts of the world - in the Middle East, in Afghanistan and Pakistan, in parts of Central America, Africa and Asia. Some of these places may become safe havens for new terrorist networks," he said.

"Both Al Qaeda and now ISIL pose a direct threat to our people, because in today's world, even a handful of terrorists who place no value on human life, including their own, can do a lot of damage," Obama said.