East Timorese President Xanana Gusmao has urged Canberra to allow 1,600 of his compatriots who fled to Australia about a decade ago, in the bloody years before independence, to stay.

The asylum seekers would not impose any hardship on the Australian economy whereas destitute East Timor would struggle to provide for them, Gusmao told a conference here about nation building.

"These 1,600 Timorese will merely constitute another 1,600 mouths that we are unable to feed, dozens more families that we are unable to shelter," he said.

Canberra argues that the asylum seekers, who have settled in the Australian community, were never granted full refugee status and since East Timor's independence on May 20 last year it is safe for them to return.

Gusmao pointed out that the recently ratified Timor Sea Treaty on gas field revenues between Canberra and Dili, which resulted in the fledgling nation waiving significant claims, had resulted in great economic benefit for Australia.

The East Timorese left what was then a strife-torn Indonesian province more than 10 years ago, some after the 1991 Santa Cruz cemetery massacre when Indonesian soldiers opened fire on hundreds of mourners in a Dili funeral procession.

Immigration Minister Philip Ruddock recently accused the East Timorese asylum seekers of lying to gain entry to Australia and labelled them "unlawful non-citizens".

Pro-Timorese activists have argued that the would-be refugees have become victims of the conservative government's tough stance on asylum seekers, which includes mandatory detention of some applicants and the establishment of holding camps on remote Pacific islands.

East Timor won independence from 24 years of Indonesian rule last May after a long and bloody struggle.