Australians have a few similar expressions like "you're barmy" [ crazy] or "Pull ya head in", meaning: I don't want to listen to you so shut up. Example: Pull ya head in, you don't know what you're talking about.

That's pretty much the meaning - "You're not making sense." The sentence gives the picture of someone who is suffering from sunstroke and whose mind isn't working properly as a result.

yes, that's correct.