Drought is blamed for Australia's widening trade deficit which hit 1.336 billion Australian dollars (1 billion U.S. dollars) in December last year compared with 879 million dollars (695 million U.S. dollars) in November.

The drought has been depicted as the worst drought in over 100 years.

It affected rural exports, which fell four percent while the total exports fell one percent, according to new figures released by the Australian Bureau of Statistics Friday.

Meanwhile, stronger Australian dollar is also blamed for the decrease of the exports.

However, rising imports are a sign of underlying strength in the economy, said economist Joseph Capurso from the Commonwealth Bank of Australia, one of the leading banks of the country.

"Higher imports are a sign that the economy is strong," he said.

"They are a sign of strong domestic demand," Capurso said.

He said the Reserve Bank of Australia (RBA) is unlikely to be swayed by these figures.

"The RBA won't be making changes to monetary policy based on today's figures," he said.

"They are more concerned with last week's inflation figures, which were very low," he added.

"They will be sitting on the sidelines," he said.

There had been allegations that the RBA would raise the interest rates to ease the pressure of high inflation rates before the release of last week's lower-than-expected inflation figures.