Rural populations in Australia are in decline and rural farm businesses now endure chronic labour shortages. Livestock enterprises traditionally require more labour than their cropping counterparts and this threatens future increases in their intensity and scale. The influence that labour scarcity has on the profitability of mixed-farming systems in the Central Wheatbelt of Western Australia is investigated in this study. When labour supply is assumed to be non-limiting, perennial plants are profitable where their out-of-season production sustains a sizeable breeding flock in a prime-lamb enterprise. However, when labour supply is limited and labour demand is defined as a function of enterprise mix, cropping activity increases and livestock production decreases. In addition, the proportion of the farm planted with perennial pasture declines. This has implications for natural resource management, with perennial pasture helping to prevent soil erosion, decrease waterlogging, and reduce recharge to saline watertables. Efforts to improve the labour efficiency of livestock production are therefore highly pertinent if perennial pastures are to offset land degradation on a broader scale.