Trade surplus narrows as imports rise

Strengthening imports and weaker commodity prices have weighed on Australia's trade surplus.

An increase in imports has seen Australia's trade surplus narrow in June. (AAP)

Australia's trade surplus narrowed in June as imports rose and coal and iron ore exports fell.

The trade surplus of $856 million in June was down from a $2.02 billion surplus in May, and well below economists' expectations of a $1.8 billion surplus.

Exports fell by $439 million in June and imports rose by $730 million, reducing the trade surplus by $1.2 billion from May.

JP Morgan analyst Ben Jarman said the main surprise was an increase in imports, particularly of capital goods such as telecommunications equipment.

CommSec senior economist Savanth Sebastian said imports of capital goods reflect business investment, and are now growing at their fastest rate in almost five years.

Iron ore and coal exports fell in June due to weaker market prices, but economists at Citi said prices have since improved.

"Therefore, we expect a rebound in iron ore export values in July and a possible widening in the trade surplus as a result," they said in a note.

Mr Jarman said he expects trade to make a contribution of just 0.1 per cent to June quarter economic growth.