GANGS attacked Australian and United Nations personnel in the East Timorese capital, Dili, yesterday as the former ruling party Fretilin planned sweeping protests against being excluded from a new coalition government led by the independence hero Xanana Gusmao.

The Fretilin-appointed prime minister, Estanislau da Silva, told the Herald that the party would "use every legal means at our disposal" to protest against the appointment of Mr Gusmao, who will be sworn into office at the presidential palace this morning.

Youths angry at Mr Gusmao's appointment hurled rocks and chanted "down with John Howard" as Australian troops and other security forces tried to quell a second day of sporadic violence in Dili, where most shops and government buildings remained closed.

Banners accusing the President, Jose Ramos-Horta, of being a "puppet" of the Australian and US governments have suddenly appeared in several of Dili's refugee camps.

As scores of youths rioted near one of the camps next to Dili airport yesterday, police fired live bullets over the heads of a mob chasing a vehicle containing four terrified Australian soldiers who had been attacked at an illegal roadblock. The vehicle's windows were smashed and tyres punctured.

"The woman driver put her foot down and gunned it away from the protesters … it was a great effort," one of the soldiers inside the vehicle said later. The soldiers were unhurt.

There were reports of violence in several other districts. In Baucau, the second largest city, four buildings were torched, including one being used by an international aid agency.

Security forces have fought running battles with protesters since Mr Ramos-Horta's decision became public on Monday night, ending weeks of political uncertainty in a country struggling to recover from violent upheaval last year that left 37 people dead and forced more than 100,000 to flee their homes.

Fretilin's powerful secretary-general, Mari Alkatiri, last night called on party supporters not to react with violence.

"I am not a policeman," Mr Alkatiri said. "I am a political leader. I will try to persuade … this is the only way we can do it."

He said: "People are really frustrated. They voted for Fretilin, expecting Fretilin to govern the country and suddenly with some kind of interpretation of the constitution, the second party was invited [to form government]."

Mr Alkatiri, who was deposed as prime minister during last year's violence, said he would not attend today's swearing in ceremony because he did not receive an invitation.