Low inflation and fuel costs are expected to boost retail spending, according to the Australian Retailers Association (ARA).

The ARA said the Consumer Price Index (CPI) showed inflation of 0.2 per cent in the 2014 December quarter which followed a rise of 0.5 per cent in the September quarter providing explanation of reduced pricing during the 2014 Christmas period.

The CPI rose 1.7 per cent in the year to the December quarter compared with a rise of 2.3 per cent in the September quarter showing a slow yet steady pace in the lead up to Christmas 2014 sales.

ARA executive director, Russell Zimmerman, said retailers kept prices low through discounting over the Christmas period and the ARA was hopeful competition in the supermarket sector would also continue to put pressure on prices.

“Competition on everyday prices in the supermarket sector has shown benefits in the latest CPI figures and the ARA calls for the government to increase that competition in its current competition review process.

“There is no doubt lower fuel costs will flow through the supply chain which will further reduce costs, leaving more cash in consumer pockets to drive retail sales,” Zimmerman said.

While there has been some pressure from the higher Australian dollar on imports, all indications show lower fuel costs and fierce competition to drive costs lower.

The ARA now looks towards the release of the December retail trade figures to confirm its pre-Christmas predictions of $45 billion.