Australia as a continent represents a semi-arid environment that is generally water-limited. Changes in rainfall pattern will inevitably occur due to rising temperatures caused by climate change, which has a direct impact on the distribution of Australia’s vegetation (green cover). As variability in rainfall continues to increase, i.e., in frequency and/or magnitude, due to climate change, extreme climate events such as droughts are predicted to become more pervasive and severe that will have an adverse effect on vegetation. This study investigates the effects of extreme climate on Australia’s green cover during 2003–2018 for the end of rainy seasons of April and October in the northern and southern parts, respectively, to (i) determine the state of vegetation and its changes, (ii) identify “hotspots”, i.e., regions that constantly experienced statistically significant decrease in NDVI, and (iii), relate changes in the identified hotspots to GRACE-hydrological changes. These are achieved through the exploitation of the statistical tools of Principal Component Analysis (PCA) and Mann-Kendel Test on Gravity Recovery and Climate Experiment (GRACE) hydrological products on the one hand, and the utilization of Australia’s rainfall product and Moderate Resolution Imaging Spectroradiometer Normalized Difference Vegetation Index (MODIS-NDVI) used here with its native spatial resolution of 0.002413∘ × 0.002413∘ on the other hand. Differences between 3-year intervals from 2003 to 2018 for both April and October datasets are used to quantify vegetation variations. Through area change analysis, the vegetation differences (2003–2018) indicate that April exhibited larger increase (13.77% of total vegetation area) than decrease (7.83%) compared to October, which experienced slightly larger decrease (9.41%) than increase (8.71%). South Australia and Western Australia emerge as “hotspots” in which vegetation statistically decreased in October, with no noticeable change in April. GRACE-based hydrological changes in both hotspots reflect a decreasing trend (2003–2009) and increasing trend (2009–2012) that peaks in 2011, which then transitions towards a gradually decreasing trend after 2012. Australia-wide climate variability (ENSO and IOD) influenced vegetation variations during the data period 2003 to 2018.