Christmas Island residents have expressed concern that a newAustralian plan to process asylum seekers offshore could damage theireconomy.

Last week, Australian negotiated an in-principle dealwith Malaysia that would send 800 asylum seekers to Malaysia in returnfor Australia resettling 4,000 already approved refugees.

Thenew policy presents a dilemma for Christmas Islanders, who do not wanta repeat of violent riots in March or the shipwreck that killed 50asylum seekers in December, but the island's economy relies heavily onthe detention system for employment and services.

ResidentRussell Payne says he believes the Australian government's policy maystop the boats, but that will have a flow-on effect on the island'seconomy.

"It's something that might put a stop gap in the flow of the boats," he said.

"On the island it has mixed blessings. If the boats stop, of course, our economy will crash.

"Theseare the sort of things you balance up but there's no balance in it ...you can't have people risking their lives as far as I'm concernedanyway."

Shire president Gordon Thomson says people areconcerned about any policy that reduces the amount of asylum seekers onthe island, but says the Department of Immigration has told him therewill be no sudden change.

"Basically, business as usual in the short term," he said.

Mr Thomson says the number of asylum seekers is likely to decline from 1,700 to around 1,000.