In this study, we employ the Conformal Cubic Atmospheric Model (CCAM), a variable-resolution global atmospheric model, driven by two distinct sea surface temperature (SST) datasets: the 0.25° Optimum Interpolation Sea Surface Temperature (CCAM_OISST) version 2.1 and the 2° Extended Reconstruction SSTs Version 5 (CCAM_ERSST5). Model performance is assessed using a benchmarking framework, revealing good agreement between both simulations and the climatological rainfall spatial pattern, seasonality, and annual trends obtained from the Australian Gridded Climate Data (AGCD). Notably, wet biases are identified in both simulations, with CCAM_OISST displaying a more pronounced bias. Furthermore, we have examined CCAM’s ability to capture El Niño-Southern Oscillation (ENSO) and Indian Ocean Dipole (IOD) correlations with rainfall during Austral spring (SON) utilizing a novel hit rate metric. Results indicate that only CCAM_OISST successfully replicates observed SON ENSO- and IOD-rainfall correlations, achieving hit rates of 86.6% and 87.5%, respectively, compared to 52.7% and 41.8% for CCAM_ERSST5. Large SST differences are found surrounding the Australian coastline between OISST and ERSST5 (termed the “Coastal Effect”). Differences can be induced by the spatial interpolation error due to the discrepancy between model and driving SST. An additional CCAM experiment, employing OISST with SST masked by ERSST5 in 5° proximity to the Australian continent, underscores the “Coastal Effect” has a significant impact on IOD-Australian rainfall simulations. In contrast, its influence on ENSO-Australian rainfall is limited. Therefore, simulations of IOD-Australian rainfall teleconnection are sensitive to local SST representation along coastlines, probably dependent on the spatial resolution of driving SST.