(SYDNEY) - Australian Prime Minister Kevin Rudd called on Asia-Pacific countries Thursday to form a European Union-style grouping that he said would enhance regional security and prosperity.

Rudd said an Asia-Pacific Community -- a potential economic powerhouse including China, India, the United States and Japan -- could be established by 2020.

"The key thing is to enhance security and regional cooperation, which at present is fragmented," Rudd said in a radio interview after outlining the idea in an address to the Asia Society Australasia on Wednesday night.

"Remember the region is currently host to a whole range of unresolved territorial conflicts -- the Taiwan Straits, the Korean peninsula, Kashmir, involving a whole range of nuclear weapons states.

"We can either stand back and allow things to drift, or we can say 'actually there should be a better way of handling this'. That's what we're putting forward as an ambitious proposal for the future."

Rudd, a fluent Mandarin speaker and ardent Sinophile, has made engagement with Asia a foreign policy priority since his election last November.

Rudd's stance contrasts with that of his conservative predecessor John Howard, whose foreign minister Alexander Downer argued Australia had a "practical" engagement with Asia's booming economies but not the "emotional" engagement it shared with Britain and the United States.

Outlining his vision for an Asia-Pacific Community in his speech in Sydney, Rudd said Australia needed to prepare for the "Asia-Pacific century."

"Put simply, global economic and strategic weight is shifting to Asia," he said.

"For the first time in the settled history of this continent, we find ourselves in the region that will be at the centre of global affairs."

Rudd said the process began with Japan's post-World War II recovery, followed by rapid development in South Korea, Taiwan, Hong Kong and Singapore, then the countries of Southeast Asia and now the emergence of China and India as economic giants.

He said existing regional groupings such as the Asia Pacific Economic Cooperation (APEC) forum did not go far enough, calling for a body that could deal with a full spectrum of economic, political and security issues.

"The purpose is to encourage the development of a genuine and comprehensive sense of community whose habitual operating principle is cooperation," he said.

"The danger in not acting is that we run the risk of succumbing to the perception that future conflict within our region may somehow be inevitable."

Rudd said that by 2020, Asia would account for 45 percent of global gross domestic product, one third of global trade and a quarter of the world's military expenditure.

He said the region's growing population -- with India expected to overtake China as the world's most populous nation by 2050 -- and demand for higher standards of living would put increased pressure on resources.

Meeting food, water and energy needs were some of the major regional challenge that no single country could address alone, Rudd said.

The European experience showed a regional body could help defuse regional flashpoints, as well as boosting trade and helping deal with transnational problems such as terrorism, natural disasters and disease.

"We have something to learn from Europe, where centuries of animosity have been transformed into an unparalleled degree of transnational cooperation," he said.

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