Supermarkets have slashed their fruit and vegetable prices due to an oversupply — but we could soon be facing a shortage as backpackers flee to New Zealand. Picture: Toby Zerna

The controversial tax, introduced in the 2014-15 Federal Budget and set to take effect from 1 January 2017, would slug working holiday visa holders with 32.5 per cent tax on every dollar they earn.

The government appears likely to junk the widely unpopular measure after a review by the Department of Agriculture received more than 1700 submissions.

But despite Agriculture Minister Barnaby Joyce hinting a decision was coming within the next few weeks, Senator Xenophon warns the damage has already been done due to the “social media grapevine”.

Farmers around the country who rely on seasonal workers have already reported a sharp drop-off in the number of applicants, many of whom have opted to travel to New Zealand instead, where they would be taxed at around half the proposed 32.5 per cent rate.

“Normally by now, we would have about 1500 applicants but, as of today, we only have 600 applicants, then only a third who apply will accept a job,” Reid Fruits owner Tim Reid told The Mercury.

“It is a critical issue for us. We are a long way short from having the picker numbers to get the crop in, otherwise fruit will be wasted.”

Senator Xenophon said “thousands” of tonnes of fruit will be left “rotting on the ground” this summer due to the lack of workers. And if that happens, consumers will be the ones feeling the pinch.

“That’s what farmers are saying,” he told news.com.au. “If fruit and veg are left rotting on the ground and it’s for domestic consumption, if there’s less fruit picked but same demand, prices rise. It’s basic economics 101.”

On Tuesday, Senator Xenophon’s NXT party urged the government to relax “inflexible and punitive” welfare restrictions that currently discourage young unemployed Australians from doing seasonal work on farms.

He wants the government to give Newstart recipients greater flexibility, such as earning up to $5000 without any penalty if they fill the backpacker void.

Under the plan, they would get an extra $300 if they have to travel more than 100km, while job service providers would also get a bonus if they successfully placed jobseekers.

“Our plan gives unemployed Australians the opportunity to ‘taste’ work in primary production without fear of losing unemployment benefits,” NXT’s Rebekha Sharkie said in a statement.

“We are assisting farmers to access a wider pool of casual labour though the Job Active program, which for many unemployed Australians could likely lead to ongoing work on the land.”

Treasurer Scott Morrison said the real problem with the welfare system was some people reject such jobs.

“The reason we need to get backpackers into these jobs in these places is because there are unemployed Australians living in these areas who won’t take these jobs,” he told Ray Hadley on 2GB radio on Tuesday.

Mr Joyce said he had spoken to Prime Minister Malcolm Turnbull, who is in New York for the United Nations General Assembly, about the issue. “We’re going to do this diligently and bring this to a conclusion,” he told reporters in Rockhampton.

Earlier this month, National Farmers’ Federation president Brent Finaly warned the backpacker tax would “chase working holiday makers away in droves, and, in doing so, crush agricultural labour supply”.

— with AAP