German chancellor Angela Merkel has urged all nations to commit to cutting carbon dioxide emissions, warning that climate change does not respect borders.

In the wake of Prime Minister Tony Abbott’s snub of a call from US President Barack Obama to invest in a climate change fund, the German leader has spoken in Sydney, saying all nations need to do more to combat rising emissions.

“If we do not put a brake on climate change it will have devastating consequences,” she said in an address to the Lowy Institute.

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She noted the European Union had agreed to cut emissions by 40 per cent by 2030, calling the commitment “an important marker” ahead of global climate talks in Paris in 2015.

“Only in this way can global warming be limited,” she said.

“It is important for all countries to commit.”

Chancellor Merkel also announced she had agreed to form a joint economic working group between Australia and Germany.

“There are a lot of bonds that unite Australia and Germany but because we know that good things can always be improved upon, Prime Minister Abbott and I decided to set up an economic co-operation group,” she said.

The Chancellor made her address to a packed ballroom at Sydney’s five-star Westin Hotel.

Former prime ministers John Howard and Paul Keating were in the audience, as were business and political figures including education review chairman David Gonski, Reserve Bank board member Heather Ridout, Commonwealth Bank chief Ian Narev, Sydney Lord Mayor Clover Moore and former Reserve Bank governor Ian Macfarlane.

Speaking in German with a translator, Chancellor Merkel noted that the Sydney suburb of Leichhardt bore the name of a German explorer.

The former scientist also brought her technical background into play by advising how to fix the feedback problem in the audio system.

The former East German citizen focused on global affairs and was scathing of Russia’s incursion into Ukraine.

“Who would have thought, 25 years after the end of the Cold War, something like this could happen?” she asked.

The chancellor also said the world must learn from the global financial crisis that it must not to carry too much debt.

She said Australia was “doing much better” with its debt than Japan, the US and Europe.

-AAP