SYDNEY, Australia - An Australian state leader on Tuesday backed calls for a drug trafficker jailed for 20 years in Indonesia to serve out her sentence at home amid grave fears for her mental health.

Queensland premier Anna Bligh said a psychiatric report warning Schapelle Corby was "hanging by a thread" should prompt a review of whether it was appropriate for her to be transferred from Bali's Kerobokan prison.

"These matters are quite appropriately dealt with on a federal level but I have to say I have always thought it would be better if Schapelle Corby served her time in Australia," Bligh said.

"These latest incidents may be an opportunity for that to be reconsidered," she added.

Psychiatrist Jonathan Phillips assessed Corby, 32, during a visit to her prison on the Indonesian resort island this month and warned her mental health was rapidly deteriorating.

"She is lost in her own bewildering world where fantasy, hallucinations and bizarre ideas dominate her mind," Phillips said, according to a report in New Idea magazine.

Phillips, a former president of the psychiatrists' guild of Australia and New Zealand, said Corby was "hanging by a thread" and needed to be moved.

Family friends told public broadcaster ABC the former beauty student had regressed to a childlike state, speaking like a little girl and asking her mother when she would take her home.

Corby's sentence was last week cut by four months as an act of goodwill during Indonesia's Independence Day celebrations.

She was found guilty of trafficking 4.1 kilograms (nine pounds) of marijuana in 2005, but has always maintained her innocence and claims international drug smugglers placed the drugs in her luggage. --AFP