The Pope has addressed more than 100,000 people at Sydney's Darling Harbour.
Pope Benedict arrived on Thursday evening on a flotilla of boats following a tour of the harbour.
In his first address to World Youth Day pilgrims, the Pope warned that the world's resources are being squandered by insatiable consumption.
Saying the world has grown weary of greed and exploitation, he called for action to protect the environment.
The pontiff also spoke of his delight at attending a festival with young people from all over the world.
Following the address, he made his way by motorcade through downtown Sydney before returing to the city's St Mary's Cathedral for the night.
Father John Adams, one of 4,000 New Zealand Catholics who made the trip across the Tasman, says the event is a great boost to the Catholic church.
He says the Pope was given a hero's welcome when he arrived at Darling Harbour, with young people swarming to get close to him.
Earlier in the day, the Pope used his official welcome at Government House to praise the Australian Government's apology to the Stolen Generations.
Prime Minister Kevin Rudd told the Pope that Australians of all faiths welcomed his visit.
"You are welcome as an apostle of peace in an age when in an increasingly interdependent world, peace is a much needed voice among us all," Mr Rudd said.
Pope Benedict used his official welcome at Government House to praise the Australian Government's apology to the Stolen Generations.
He thanked the Australian people and praised the Federal Government "for seeking to close the gap between Indigenous and non-Indigenous Australians regarding life expectancy, educational achievement and economic opportunity".
"[Aborigines'] Ancient heritage forms an important part of the cultural landscape of modern Australia," he said.
Pope Benedict also met with Governor-General Sir Michael Jeffery at Admiralty House and visited the tomb of Australia's saint-in-waiting, the beatified Sister Mary Mackillop.
He has made no comment so far about sexual abuse by priests, which has been a big issue in Australia in the run-up to his visit.