The tropical conifer Callitris intratropica (Cupressaceae) produces clear annual growth rings, and has been shown to be potentially useful for understanding past climate variability in northern Australia. As climate patterns in this region become less predictable, an understanding of plant responses to different weather patterns is of importance. In this paper, we examine tree water relations using a parameter here called tree water deficit (ΔD), determined from de-trended stem size variability in densely grown ('grove') and isolated trees. This parameter provides an integrated measure of the trees' response to water supply and demand under constantly changing environmental conditions. The work, conducted over 12 months, found that daily variation in tree water deficit was determined mainly by soil water availability, but temperature and relative humidity contributed more to the variability over some periods. Isolated and grove trees exhibited quite distinct patterns of ΔD development during the year, but particularly during the transition between the dry and wet seasons. The results of this work suggest that the dendrochronological interpretation of tree rings in the context of strongly seasonal water availability should incorporate an understanding of the development of seasonal drought in isolated trees compared with trees experiencing strong intra-specific competition. Different responses based on the ecological situations of the trees will affect their patterns of stem growth, and ultimately the climatic information that is incorporated in ring width variability.