Australia slips to $1.36b trade deficit

Australia's trade balance has slipped to a $1.36 billion trade deficit in December as imports of fuels and machinery jumped during the month.

Australia has slipped to a heavy trade deficit in December after imports surged during the month.

The trade balance for the month fell to a deficit of $1.36 billion, down from a revised $36 million surplus in November and against market expectations for a surplus of $200 million.

Exports were up by $510 million or 2.0 per cent for the month led mainly by an increase in shipments of iron ore and coal, the country's top two export earners, the Australian Bureau of Statistics said.

However, imports jumped by $1.9 billion or 6.0 per cent during the month, mainly on account of a surge in imports of fuel as well as machinery and equipment.

Australia's trade balance has been in surplus for much of the past year, helped by a rebound in iron ore prices and rising natural gas exports.

The Australian dollar fell as low as 78.67 US cents, from 78.85 US cents ahead of the 1130 AEDT data release but has since regained some ground.

The data comes ahead of the Reserve Bank of Australia's monthly board meeting, with the central bank widely expected to hold the cash rate at a record low.