Australia will cap the backpacker visa extensions it grants in return for regional work, a change that Development Policy Centre director Stephen Howes said creates a significant opportunity for the PALM scheme.

Writing on the Devpolicy Blog, run by the Development Policy Centre at the Australian National University, Howes said Minister for Home Affairs Tony Burke announced the caps in a National Press Club speech on 17 September.

The caps are 45,000 second-year visas and 5,000 third-year visas granted in return for specified regional work, excluding United Kingdom nationals, to be allocated by lottery. According to the article, that is a cut of 44 per cent against the visas issued in 2025–26.

Howes said the cut to the third-year category amounts to 84 per cent, close to the abolition of both extensions recommended by Labor's 2023 Review of the Migration System.

Australia introduced the second-year extension in 2005, giving backpackers a second year in return for 88 days of specified regional work. The Morrison government announced the third-year extension in 2018 in return for six months of regional work in the second year.

Most of that work has been in agriculture, Howes said, and the backpacker visa has become a de facto agricultural work visa. Extensions granted for regional work rose from 26,400 in 2022–23 to 54,900 in 2023–24 and almost 90,000 in each of the last two years. The third-year category grew from 7,600 in 2023–24 to 31,500 in 2025–26.

Howes said it is not clear how the lottery will work, including whether it will be held once a year or monthly, and whether applicants can enter more than once. Delays in moving to second and third visas are likely, he said.

He said the risk is that a quota of 5,000 can be increased quickly, and might be under a change of government. The Nationals have come out against the cap, he said.

On the effect on farm labour, Howes said backpacker visa extensions granted on the basis of agricultural work numbered 42,000 in 2024–25, while the National Farmers Federation estimates 52,000 backpackers work in horticulture alone. Applying the 44 per cent cut to the lower figure gives a reduction of 18,300 farm workers, he said, though the behavioural response of backpackers cannot be judged.

The number of short-term Pacific Australia Labour Mobility workers, nearly all of whom do seasonal farm work, fell over 2023 and 2024 and has since stabilised at about 16,000, he said. About 3,300 long-term PALM workers also work on farms.

Howes said PALM workers and backpackers are not perfect substitutes, because employers can hire backpackers a day at a time without government permission. Demand for PALM workers will clearly rise, he said, but by how much cannot be quantified.

He said the 2023 migration review recommended abolition because the work requirement was "a key driver of exploitation", citing a Fair Work Ombudsman finding a decade ago that the work-for-visa system was broken and a 2017 University of Adelaide study that found backpackers were more likely to be exploited than Pacific seasonal workers.

Howes described the 2018 introduction of the third-year visa as a "Pacific step down" and the latest announcement as a big step up.