The trade shortfall shrank to A$1.94 billion ($1.8 billion) from a revised A$2.16 billion in November, the Bureau of Statistics said in Sydney.
Exports rose to a record as Rio Tinto Group, BHP Billiton Ltd. and smaller miners sold more natural resources to China and India, which is helping Australia weather a slowdown in U.S. growth. Increased overseas shipments may extend the nation's economic expansion, now in its 17th consecutive year.
Imports advanced 0.1 percent in December, today's figures also showed, suggesting that rising interest rates and higher fuel costs have so far failed to damp consumer spending.
The Australian dollar traded at 90.33 U.S. cents at 1:08 p.m. in Sydney from 90.30 cents just before the report was released. The yield on the benchmark five-year bond increased to 6.6 percent from 6.51 percent at close of trading on Feb. 1.
The S&P/ASX 200 Index advanced 2 percent. Shares in BHP Billiton climbed 1.3 percent to A$39.89 and shares in coal producer Wesfarmers Ltd. jumped 1.8 percent to A$39.22.
Australia's exports increased 1 percent from November to A$18.6 billion, the most since the government began calculating the trade figures in 1971. Farm shipments, such as wheat, wool and sheepskin, advanced 9 percent in December. Exports of coal rose 10 percent. Overseas shipments account for about 20 percent of gross domestic product.
Australia's monthly trade balance has been in deficit for almost six years, reaching a record shortfall of $2.86 billion in October, as exporters battled congestion at mines, ports and railways.
Total imports rose to A$20.5 billion in December, today's report showed. Imports of capital goods, which includes business machinery, climbed 3 percent and imports of intermediate goods, such as chemicals, fell 3 percent.