Dryland salinity has resulted from clearing of deep-rooted plant species for farming. Farm diversification with trees and perennial pasture species may therefore reverse this problem. However, current opinion is that existing land uses are close to economic optimum and therefore changes involving perennials may not be viewed as desirable. Socially there is a trade-off between the opportunity cost of changing existing land use with the perennials and the current salinity reduction targets. In this context, this paper investigates the economic implications of key decision parameters of farmers on their response to achieve farm diversification involving farming with the perennials. This research aims to model diversification and supply responses of, in particular, wheat across the Australian wheat-sheep zone, and between the regions of NSW and Western Australia.