Australia's current account deficit narrowed to $5.67 billion in the March quarter, seasonally adjusted.
This followed a deficit of $11.7 billion in the December quarter, the Australian Bureau of Statistics (ABS) said on Tuesday.
The median market forecast was for a deficit of $7 billion in the March quarter.
The current account measures flows of income between Australia and the rest of the world, like interest payments and dividends, and transfers like foreign aid, as well as the export and import of goods and services.
The surplus on goods and services rose $5.3 billion in real terms, which would add 1.4 percentage points to growth in the March quarter measure of gross domestic product (GDP), the ABS said.
Australia's net foreign debt fell to $855.65 billion in the March quarter from $858.9 billion in the previous quarter.
Australia's terms of trade on goods and services fell 1.2 per cent in the March quarter, seasonally adjusted.
The terms of trade are the price of exports relative to the price of imports.