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Farmers say debt a bigger threat than drought -

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MARK COLVIN: Australia's farming families say they're in the midst of a crisis - not just from drought but from debt.

As they face the loss of homes and land, many think it's time to get rid of banks, and place their debt with government.

But governments aren't keen on that as Eric Tlozek reports.

ERIC TLOZEK: The 'd' word in farming is drought, which is badly affecting parts of Queensland, New South Wales and Victoria. But there's another 'd' word, debt, that sticks around for longer, and is arguably a bigger threat to farming families.

ROB KATTER: We don't ask for much very often because we certainly don't get much because there's no votes out here but what we do ask for is that we have the right to survive out here.

ERIC TLOZEK: Rob Katter is the Member for Mt Isa in the Queensland Parliament. He says farmers need more than drought assistance after several tough years. He wants to see their debt restructured and taken on by the Government.

ROB KATTER: You know just give us a leg up for the next four or five years and we'll repay it to the Queensland economy and the Australian economy in spades.

ERIC TLOZEK: The current drought is the most high-profile problem facing farmers. But the problems in the farming sector go deeper. Ben Rees is an economist and a farmer who argues that bad lending practices and an over reliance on free-market economics have created a dangerous situation for Australia's primary producers.

BEN REES: What you've got across Australia is this unsustainable debt level and what you find in a particular industry is they have different catalysts. For example in Western Australia it was falling land values.

ERIC TLOZEK: People like Ben Rees and Rob Katter want the Federal or State Governments to create a rural bank that would write down farmer's debts and issue lower interest loans. It's not a new idea, but it's a popular one with many in regional Australia. John Wharton is the mayor of the Richmond Shire in Western Queensland, where grazing is the main industry.

JOHN WHARTON: I think a lot of people in the bush and all the farmers across Australia, right across to the wheat belt of Western Australia where I know guys, would be saying, "Well, we think it would be a real good idea."

ERIC TLOZEK: But there's not much political appetite to create such a bank. In Queensland, the State Government's ruled it out. Federally, there are concessional loans and farm finance available, but farmers argue this hard to access and the programs are under-subscribed.

Rob Katter says resolving the problem of debt wouldn't cost the taxpayer much, but it would make a huge difference to farming towns and families.

ROB KATTER: If we can address those issues, we've got a good viable industry, we keep our inland inhabited and we keep our towns inland supported and that's good news for the people in the city as well.

MARK COLVIN: Queensland MP Rob Katter, ending Eric Tlozek's report.