In his speech, Mr Bush said his priorities were to win the war against terror, make America safer from attack, and revive the economy.

President Bush - who has enjoyed unusually high approval ratings since the 11 September attacks - promised his economic proposals would revitalise the economy and end recession.

Just a start

Correspondents say Mr Bush is being careful not to repeat the mistake his father made when he squandered the immense popularity gained after the Gulf War by neglecting the domestic agenda.

Dick Cheney took the vice president's traditional place on the rostrum, despite a recent policy of keeping him and Mr Bush apart in case of terrorist attack.

President Bush warned that the war on terror would be expensive, but America would pay "whatever it costs".

"What we have found in Afghanistan confirms that, far from ending there, our war against terror is only beginning," Mr Bush said.

"Thousands of dangerous killers, schooled in the methods of murder, often supported by outlaw regimes, are now spread throughout the world like ticking time bombs," he said.

'Axis of evil'

America needed to continue to be "steadfast, patient and persistent" as it brought terrorists to justice and stopped governments that supported terror from threatening the US.

"The United States of America will not permit the world's most dangerous regimes to threaten us with the world's most destructive weapons," said Mr Bush.

He specifically named Iraq, North Korea and Iran, and spoke of "an axis of evil" threatening the world's peace. He said terrorist training camps still existed "in at least a dozen countries", but did not give names.

He did say US troops were helping to train the Philippines' armed forces "to go after terrorist cells", while the US Navy was patrolling the coast of Africa to block "the establishment of terrorist camps in Somalia.

Philippines legislators described the statement as "disturbing", and Defence Secretary Angelo Reyes said his country would not be forced by Washington to act against its national interest.

Iranian Foreign Minister Kamal Kharrazi accused the United States of interfering in Iran's internal affairs and condemned Mr Bush's allegation of Tehran's involvement in terrorism.

Iraq retorted by accusing Mr Bush of practising "state terrorism against peoples and governments that do not surrender to US wishes".

Fighting recession

The US president also laid out his economic agenda, sounding determined to deflect Democratic Party efforts to blame his policies for economic woes ahead of mid-term congressional elections in November.

Increased government spending, combined with lower tax revenues because of economic slowdown, are expected to push the federal budget into deficit for the first time in four years.

"Our budget will run a deficit that will be small and short term so long as Congress restrains spending and acts in a fiscally responsible way," he said.

But there was a way out of recession and a way to create jobs, he said.