This terms refers to people living in Australia who try hard to replicate/copy Arab ( specifically Lebanese Arab) culture. This includes but is not limited to:

smoking shisha/hookah (whatever you feel like calling it), hanging out with Lebanese/Arab people, and constantly using the words " wallah" and "shuu" in their everyday language.

Most of these try-hards have origins in southern Europe however it is also pretty common to find Anglo-Celtic/white Australians doing the same thing.
Josh: hey bro, did you see Christina's new post on Facebook?
Daniel: Nah man, what was it?
Josh: She recently got a new tattoo on her arm!
Daniel: Really?! What was it?
Josh: To me, it looked like Arabic writing.
Daniel: Oh. Isn't she Italian tho?
Josh: Yeh bro.

Daniel: Haha she's clearly Lebwashed.

Sienna: Hey gals, Alumbra nightclub this weekend?!
Jessica: I'm not sure. The last time we went there, everyone seemed kinda Lebwashed.
Julia: What do you mean?
Jessica: Like, there were too many guys staring at us weirdly and approaching us akwardly.
Sienna: Who cares Jessica. Even if they do harass people and start fights, they're still hot!
by abziiixx May 8, 2020
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