Dili – East Timor has many problems of its own and is not ready to accept thousands of asylum seekers under an Australian plan to build a refugee hub in the tiny country, a lawmaker said Wednesday.

Natalino dos Santos of Prime Minister Xanana Gusmao's CNRT party said there was strong opposition to the centre among parliamentarians, who voted recently to reject the proposal.

"When we first heard about this proposal from Australian Prime Minister Julia Gillard the lawmakers in parliament totally rejected it," he told AFP at Government House in Dili.

"We cannot give land to people from another country while at the same time our people are homeless. Our priority is to create social and political stability in East Timor and only then can we consider such a refugee centre."

Australia's immigration minister held talks on Tuesday with East Timorese President Jose Ramos-Horta, who says his country is ready to host a processing facility on humanitarian grounds.

Gillard first made the proposal to Ramos-Horta in a phone call in July, amid a raging political debate in Australia over how to deal with a sharp increase in the number of asylum seekers arriving by boat in Australian waters.

The conservative opposition promised to turn the boats around but Gillard has said it is a regional problem and needs a regional solution, with cooperation from transit countries such as Indonesia and Malaysia.

"There's a big conversation to pursue and so I'll have to let that conversation work through and for East Timor to talk to us about the proposition," she said Tuesday.

Ramos-Horta has dismissed reports of widespread domestic opposition to the proposals, saying people will agree once he explains the humanitarian imperatives.

But the former exile during much of Indonesia's brutal 24-year occupation said the government would have to consult the East Timorese people.

"If we are doing it we would want our people to embrace it and not... feel (it) was imposed on them, because the people who would come to Timor-Leste would have to feel they were welcome," he said Tuesday.