Abstract. Recent studies have shown that semi-arid ecosystems in Australia may be responsible for a significant part of the interannual variability in the global concentration of atmospheric carbon dioxide. Here we use a multiple constraints approach to calibrate a land surface model of Australian terrestrial carbon and water cycles, with a focus on interannual variability. We use observations of carbon and water fluxes at 14 OzFlux sites, as well as data on carbon pools, litterfall and streamflow. We include calibration of the function describing the response of heterotrophic respiration to soil moisture. We also explore the effect on modelled interannual variability of parameter equifinality, whereby multiple combinations of parameters can give an equally acceptable fit to the calibration data. We estimate interannual variability of Australian net ecosystem production (NEP) of 0.12–0.21 PgC yr⁻¹ (1σ) over 1982–2013, with a high anomaly of 0.43–0.67 PgC yr⁻¹ in 2011 relative to this period associated with exceptionally wet conditions following a prolonged drought. The ranges are due to the effect on calculated NEP anomaly of parameter equifinality, with similar contributions from equifinality in parameters associated with net primary production (NPP) and heterotrophic respiration. Our range of results due to parameter equifinality demonstrates how errors can be underestimated when a single parameter set is used.