East Timor's President Jose Ramos-Horta on Thursday asked visiting Australian Prime Minister John Howard to keep Australian peacekeepers in the young nation until the end of 2008.

"I told the prime minister that I want to see the ISF (International Stabilisation Force) here at least until the end of 2008 because we've just started to reorganise East Timor's police and defence force," Horta said.

"They've just started to modernise so it will be difficult for this country to take care of its security affairs alone," he told reporters after half-hour talks with Howard at the presidential palace in the seaside capital of Dili.

Howard made a lightning day-long visit to East Timor during which he also met with Australian troops, who have been here since May last year when street violence erupted.

The unrest stoked by factions in the military and police left 37 people dead and forced some 155,000 people from their homes. At Dili's request, thousands of international peacekeepers, headed by the Australian contingent, were dispatched to restore calm. About 1,100 Australian troops remain on duty in East Timor.

Parliamentary elections last month were supposed to open a new chapter in the young nation's democracy. But while they were peaceful and the turnout was high, no party won the absolute majority required to govern alone and parties have been bickering over how to form a government.

Ramos-Horta, a Nobel peace prize winner elected just ahead of the parliamentary polls, has the constitutional authority to decide the composition of the new government and is pushing for a national unity arrangement.

He has given the parties until July 30, when parliament holds its first session, to decide on an arrangement.

The oil and gas-rich nation – which is one of the world's poorest countries – faces huge social and economic challenges. Some 100,000 East Timorese are estimated to remain in refugee camps and the UN launched an appeal for millions of dollars in urgent humanitarian aid in Dili on Wednesday.

Horta said Howard would not immediately give a commitment on whether the troops would stay on.

"They have decided that they will be here until the end of 2007. For 2008, they are going to review and evaluate the situation in Timor-Leste" before deciding, he said, referring to East Timor by its formal name.

But Howard also said the troops were in East Timor at Dili's request and would stay "for the period of time that you request," Horta cited him as saying.

Howard told reporters that East Timor had "a special place in the hearts of many Australians" and that Australia would not abandon the nation while it was needed.

The two leaders also discussed Australian scholarships for East Timorese students, Horta said.

"He (Howard) did not close the door on this idea and his officials will come here in a short time to negotiate with the Timorese government to discuss a more concrete agreement," he added.

Howard also met with acting prime minister Estanislau da Silva for talks on security and defence before boarding a plane back to Australia. Da Silva said the Australian leader told him a government was needed quickly so that the nation could get on with development work.

The acting premier is a member of the former ruling party, Fretilin, which won 21 seats in the 65-seat parliament. Trailing in second place was a new movement set up by independence hero Xanana Gusmao, which has allied with three smaller parties and wants to form a coalition government with 37 seats in parliament.