March-quarter exports were severely impacted by the floods and cyclones at the turn of the year, according to ABS data.
Export volumes fell 8.7% in the March quarter to be 3.5% lower throughout the year, in what Treasurer Wayne Swan called the biggest quarterly fall in 37 years.
In a statement, Swan said the decline was driven by a 13.6% decline in non-rural commodity exports.
Import volumes also grew 1.3% sequentially and were 9% higher throughout the year.
Partly as a result of the export slump, the current account deficit grew by a seasonally adjusted $2.35 billion in the March quarter to reach $10.45 billion.
Australia's net foreign debt liability position also grew $29.8 billion to $677.3 billion.
But Swan expressed confidence in the underlying economy.
“Despite the heavy toll in the near term from natural disasters, the fundamentals of our economy are strong and our medium-term growth prospects remain bright,” he said.
“We have low unemployment, strong job creation, record terms of trade and an unprecedented investment pipeline gathering steam.”