Melbourne, Feb.9 : The Australian state of Victoria has serious problems with racist behaviour and racial violence, feels opposition leader Ted Baillieu.

Declaring war on racism, and putting the Liberal Party on a collision course with Premier John Brumby, who has denied Victoria is a racist state, Baillieu told the Australia India Business Council that racist Victorians are creating a climate of fear and terror on the streets of Melbourne.

"We have a law and order problem with record levels of violence. And we have a problem with racist behaviour and racial violence," The Herald Sun quoted Baillieu, as saying in the wake of a virulent anti-Australian campaign in the Indian media reporting the rise of assaults on Indian students and cab drivers.

Baillieu claimed that racist attacks had been increasing in the state under Brumby's administration for four years, especially against international students.