SYDNEY — Riot police broke up week-long anti-capitalism protests in Sydney on Sunday, with demonstrators claiming they were forcibly evicted from their city campsite in violent dawn raids.

Police said 40 people were arrested after resisting orders to pack up their shelters outside the Reserve Bank of Australia, where they have been holding peaceful protests since last Saturday as part of the global "Occupy" movement.

They had been repeatedly told to move on because they were in breach of the city's camping regulations and the 5:00 am raid was taken to minimise disruption to the public, Assistant Commissioner Mark Murdoch told reporters.

"We tried to work with them every step of the way for the last eight days," Murdoch said. "They certainly can't say they weren't warned."

Treasurer Wayne Swan said addressing inequality was an "important discussion" and he was disappointed that the protest's message had been obscured "by instances of violence".

"People of course are always free to protest as long as they are peaceful, follow the instructions of police and don't interfere with the rights of others," Swan said.

However he agreed that sections of society were struggling, despite the nation's mining-related wealth.

"While our economy is today the envy of the developed world, the prosperity doesn't stretch to every postcode,' he said.

"The fight against inequality is an ongoing battle. It?s important that governments around the world continue working to create jobs because employment is the surest path out of poverty and towards a better life."

Murdoch said the Sydney protesters had been given permission to demonstrate during daylight hours, but their overnight camping was not allowed.

Group spokesman Tim Frank said police deliberately swooped while they were sleeping and there were violent scenes when they linked arms and refused to go, with television footage of the raid showing bloodied and bruised faces.

"Seeing people who have been peaceful for eight days, crying and screaming in pain after they were woken up out of their sleep -- it doesn't make any sense," Frank told ABC Radio.

But Murdoch said the allegations were "grossly exaggerated" and the conflict was resolved quickly and peacefully with the "utmost professionalism".

"We encountered varying levels of resistance from the protesters. That resistance was met with a commensurate use of force," he said.

"Some people had their arms bent behind their backs, I make no apologies for that, absolutely none. It was to ensure compliance and their own personal safety and the safety of my police."

Of those arrested 29 were issued with fines for breaching council regulations and seven will face court on similar charges, with four charged with assaulting police.

Similar clashes between "Occupy" activists and police in Melbourne on Friday ended with 20 arrests and the injury of two police officers.

The Australian camps were established in solidarity with the "Occupy Wall Street" movement in Manhattan, now in its sixth week, protesting against what participants say is excessive corporate influence over politics.