AusBonsai

Does anyone know what it is and if it will cause problems?

Mealy bug? Kill it!

That's it Theo. Also need to know that mealy bugs do not just live on the branches of trees. Usually by the time you see them there are many more living and breeding on the roots too. a systemic insecticide is the only way to kill them off. Try confidor.

I would also bare root and thoroughly clean the roots next winter

also bin the removed soil

There are three ways to control mealy bugs on crab apples. First, mechanical removal, just squash them with your fingers. Second, spray with metholated spirits. Third, use of systemic insecticides. Care is required with systemics as they are detrimental to birds, bees and fish. Persistence is the key.

your method 1 and 2 will certainly deal with the visible ones Roger but does not deal with eggs or any that are below ground on the roots. Those ones continue to suck sap from the roots, continue to breed and will move up the trunk into the branches. I have used metho on branches but have not tried to saturate the soil to deal with root infestation. I wonder if metho fumes would penetrate the root ball if the tree were sealed in a plastic bag for a while after applying metho.

Persistence will help to deal with new hatchings but can it manage the below ground infestation?

All chemical treatments have some side effects, even metho. Systemics may have worse side effects than metho but should only need to be applied once rather than regular applications.
I agree all chemical control should be used with care - Follow the instructions people - and be aware of possible harm to non target species - don't apply insecticide when plants are flowering to reduce harm to bees, etc.