East Timor's cabinet to meet this week

East Timor's cabinet will meet this week to discuss the budgetary and humanitarian crisis in the country.

Former foreign and defence minister, Jose Ramos Horta, will act as cabinet co-ordinator in the absence of a prime minister to replace Mari Alkatiri, who resigned under pressure last Monday.

Meanwhile, President Xanana Gusmao will be meeting with leaders of the Fretilin party, which holds a large majority in parliament, to discuss the appointment of a new prime minister, possibly within the next few days.

Fretilin has provided a shortlist, which includes three of it senior leaders, but diplomats said Mr Ramos Horta - an independent - remained in the running for the job and his appointment had not been ruled out by Fretelin's leadership.

Australia's military commander in East Timor, Mick Slater, said the successful end of opposing demonstrations in Dili had provided a watershed in the security situation.

Brigadier Slater said the thousands of protesters who flooded into Dili over the past week had returned peacefully to their homes.

"I think we've got a watershed in the situation here as a result of the successful conduct of two major demonstrations" he said.

He said a United Nations assessment team would begin working this week on a possible transfer to a long-term UN peacekeeping operation.

"I think it's still some time before the UN makes its decision. But once the UN has made its decision on what it's going to do then we will no doubt tailor our future commitment here to support the UN intentions," he said.

The crisis was triggered about two months ago by Mr Alkatiri's decision to sack 600 soldiers who had complained of discrimination.

Mr Alkatiri resigned, after weeks of demands by protesters.

- RADIO AUSTRALIA