Australia's trade balance has languished in the red for the 14th straight month as the end of the mining investment boom takes its toll on the nation's bottom line.
The deficit in May was $2.75 billion, after blowing out to $4.14 billion in April, the largest on record, the Australian Bureau of Statistics said on Thursday.
The sharp fall in the deficit in May reflects the four per cent drop in imports and the one per cent rise in exports.
Commonwealth Bank economist John Peters said after months of being a drag on the trade figures, coal and iron ore exports were one of the few bright spots in May.
By value, iron ore exports rose six per cent and coal exports were up by nine per cent and the volumes of both commodities also rose in May.
The fall in imports was mainly driven by a plunge in capital goods imports, with imports of machinery and equipment down 46 per cent in the month.
"An 18 per cent dive in capital goods imports reflecting the rapidly dissipating mining investment boom," Mr Peters said.
"The volume of capital goods imports has been trending lower as the construction-intensive part of the mining booms has unwound."
However the May deficit is more than twice what it was at the beginning of the year and Mr Peters expects the deficits to persist in the coming months while coal and iron ore prices stay weak.
"Trade deficits since the first quarter of 2014 are the collateral damage from sharply falling commodity prices," he said.
"The price of iron ore, Australia's biggest export commodity, has been in steady decline before stabilising recently."
After enjoying a rally in late May iron ore prices slipped below $US60 a tonne this week to a five week low after Australia's Department of Industry and Science sharply cut its iron ore price forecast for 2015 from $US60.40 a tonne to $US54.40.
Westpac senior economist Andrew Hanlan believes Australia is on track to post a deficit close to $10 billion for the June quarter, more than twice the March quarter deficit of $4.5 billion.
"That is a sizeable quarter on quarter deterioration and will represent a headwind to economic growth in the period," he said.
"This would continue to squeeze incomes and constrain spending power across the economy."
Mr Hanlan said while net exports, driven by higher volumes, gave economic growth a boost in the March quarter, he expects the impact of mining exports in the June quarter to be neutral.
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