The worse than expected result was driven by a steep 3% decline in exports, from about $20.2 billion in September to $19.5 billion in October.
Imports also fell, but only by around 1% (approximately $150 million), which was not enough to offset the export slump.
The fall in exports was largely driven by a 12% fall in the value of coal exports, a 7% slide in metal ores and minerals, a 17% slide in gold and an 8% decline in rural goods.
Both the price and volume of key metallurgical coal fell, while the volume of iron ore exports increased slightly but prices tumbled 9%.
The main offsetting decline in imports was a 10% fall in the value of fuel and lubricant imports.
Westpac's economics team says the detail of the data is better news for the economy than the headline figure, because it suggests only prices are falling, while the volume of exports is relatively steady.
ABS figures released yesterday showed that a steep decline in Australia's trade balance during the September quarter was likely to dampen Australia's economic growth result to be unveiled next week.