Australia's trade deficit has come in about half the size expected, due to a rebound in commodity exports.

Bureau of Statistics data show the deficit fell from nearly $2.8 billion in November to just $427 million in December, the lowest since February last year.

The improvement in the deficit came from a 3 per cent rise in exports and a 6 per cent slump in imports, presenting both good and bad news about the economy.

The good news is that exports of metal ores and minerals were up 12 per cent, coal up 5 per cent and 'other' manufactures up 9 per cent.

Rising export volumes contributed most to the increase in commodity sales, with the quantity of iron ore shipped up around 20 per cent, and the amount of thermal coal (used for power stations) sold overseas rising 23 per cent, while steelmaking coal sales were up 8 per cent.

The price of thermal coal eased 3 per cent, while the prices for steelmaking ingredients were up only 1-3 per cent.

The bad news in the trade figures was a 19 per cent slump in capital goods imports, seasonally adjusted.

In a sign the mining investment boom may be coming off its peak, imports of industrial transport equipment were down 35 per cent.

The other big drags on imports were a 58 per cent fall in civil aircraft and confidentialised items, and a 37 per cent fall in telecommunications equipment.

Westpac senior economist Andrew Hanlan says the Reserve Bank would take note of the stronger demand from China suggested by the figures.

"But they would also be concerned by the softness in capital imports, the underlying strength in the Australian domestic economy is a little bit unclear," he said.

"We have seen a softening of job ads, maybe businesses are pulling back from investment as well, so it could be a little bit of softness in the domestic economy which will be concerning them."