Gold boom drives exports in March

There's likely to be a correction soon after a large drop in the trade deficit last month, but it is still trending lower in medium term.

The rise in exports that slashed Australia's trade deficit by almost 30 per cent in March is likely to be just a flash in pan.

That's because it was driven by volatile gold exports, which surged 60 per cent in the month.

The deficit narrowed to $2.1 billion in March, down from $3.04 billion in February, the Australian Bureau of Statistic said on Thursday.

Exports rose 4.0 per cent in March, while imports were up 1.0 per cent.

Westpac economist Matthew Hassan said the gains had been slightly inflated by a $659 million rise in gold exports, which could be temporary.

"Gold exports are very volatile month to month, they fell 20 per cent in February, and a large correction next month is a genuine possibility," he said.

He said iron ore exports in particular, which rose 7.9 per cent, had fallen short of expectations given the 21 per cent rise in the Chinese iron ore spot price.

However, service exports grew 2.5 per cent in March and 16.2 per cent in the year to March.

Commonwealth Bank economist Gareth Aird said it was the tenth consecutive monthly rise in service exports.

"Australia is on track to post its first monthly services surplus since 2007 later this year, if current trends can be maintained," he said.

"A large reason for the improvement in the services trade position is due to the tourism sector."

Mr Aird said the drop in the Australian dollar since the beginning of 2015 had boosted the sector.

AMP chief economist Shane Oliver said even though Australia was still running hefty deficits compared with the last two decades, the deficit was starting to trend lower.

"There's reasonably good numbers overall and the last few months have been going in the right direction," he added.