Barack Obama calls for new 'social contract' in farewell speech

President Barack Obama warned on Tuesday that the United States faces a stern test of its democracy, in a speech to the nation that was both a fond goodbye and a call to arms.

Capping his eight years in office, Obama returned to his adoptive hometown of Chicago to recast his "yes we can" campaign credo as "yes we did".

Listing landmarks of his presidency - from the Iran nuclear deal to reforming healthcare - much of the speech was dedicated to lifting up supporters shaken by Donald Trump's shock election.

Obama called on Americans to pick up the torch, fight for democracy and forge a new "social contract".

"Democracy does require a basic sense of solidarity," he said. "For all our outward differences, we are all in this together," he said. "We rise or fall as one."

He added that adherence to the US constitution; equal opportunity and the rule of law will help keep the US safe from terrorism and creeping authoritarianism.

“Protecting our way of life requires more than our military. Democracy can buckle when we give in to fear. So just as we, as citizens, must remain vigilant against external aggression, we must guard against a weakening of the values that make us who we are,” he said.

'Protecting our way of life requires more than our military' - Barack Obama

Obama also said these principles pushed him to end torture and attempting to close down Guantánamo, even though he failed to shut the controversial detention facility.

“That’s why, for the past eight years, I’ve worked to put the fight against terrorism on a firm legal footing. That’s why we’ve ended torture, worked to close Gitmo, and reform our laws governing surveillance to protect privacy and civil liberties. That’s why I reject discrimination against Muslim Americans,” he said.

“That’s why we cannot withdraw from global fights – to expand democracy, and human rights, women’s rights, and LGBT rights – no matter how imperfect our efforts, no matter how expedient ignoring such values may seem,” he added.

'We cannot withdraw from global fights – to expand democracy, and human rights, women’s rights, and LGBT rights' - Barack Obama

Obama also took shots at the Islamic State group and traditional US rivals like Russia and China.

“Let’s be vigilant, but not afraid. ISIL will try to kill innocent people. But they cannot defeat America unless we betray our Constitution and our principles in the fight. Rivals like Russia or China cannot match our influence around the world – unless we give up what we stand for, and turn ourselves into just another big country that bullies smaller neighbours.”

With an approval rating hovering around 55 percent, according to a Quinnipiac University poll, Obama still carries considerable political weight.

Some 51 percent of Americans polled believe that Trump is doing a bad job as president-elect.

Trump's unorthodox politics have thrown the 55-year-old Obama's transition and post-presidency plans into flux.

Having vowed a smooth handover of power, Obama has found himself being increasingly critical of Trump as he prepares to leave office on 20 January.

After that, there will still be a holiday and an autobiography, but Obama could find himself being dragged backed into the political fray if Trump were to enact a Muslim registry or deport adults brought to the United States years ago by their parents.