Vegetation conditions are deeply dependent on water availability. Conversely, vegetation can also affect terrestrial water conditions by modifying evapotranspiration and other hydrological processes. Knowledge of the interactions between vegetation and land water conditions are required for understanding and simulating terrestrial water and carbon budgets in response to climate change. For the first time, in this study, a non-linear Granger causality approach is applied to investigate the water-vegetation interactions over Australia. They are characterized by respectively the normalized difference vegetation index (NDVI) and the Gravity Recovery and Climate Experiment (GRACE) terrestrial water storage (TWS). The results indicate that non-linear interactions between TWS and NDVI occur in over half (58.4%) of the continent, which are more likely to take place for grasslands, followed by shrublands, agricultural lands, savannas, and forests. A revisit-analysis of the dominant driver among water, temperature, and radiation for vegetation conditions confirms that Australia is mostly water limited. Although the total area of primarily water-limited regions has slightly decreased from 67.0% in the earlier sub-period (1985-1999) to 65.2% in the more recent sub-period (2000-2015), it accounts for a much larger proportion of the continent than that of temperature- and radiation-limited regions in both sub-periods. The spatial coverage of regions where temperature is the dominant factor has nearly tripled for the recent sub-period. This could most likely be due to the warmer climate that exacerbates the limitation of high temperature on vegetation growth and functioning. These results contribute to an improved understanding of Australia's terrestrial water and carbon cycles. The GRACE TWS shows to be highly relevant data for such investigations at a continental scale.