Big spenders in 2013 made it the best in five years for retailers, with continuing growth looking to end the malaise that has gripped the industry since the GFC.
The recovery was led by shoppers with big appetites and a taste for fine Christmas fare. They were behind an $8.1 billion increase in turnover in the sector, a peak retailers' body says.
"It really was a Christmas to eat, drink and be merry with food retailing rising," Australian National Retailers Association chief executive Margy Osmond said.
"Retailers are encouraged by today's result and it has put the sector in good stead to record a similar result, or better, in the year ahead.
"Most states are now tracking at around six to seven per cent year-on-year growth in turnover which is a positive sign for the sectors ongoing success in 2014."
However, spending on fashion and accessories dropped while solid performance in the hardware and furniture sector reflected the housing market upturn, she added.
Australia posted its eighth consecutive rise in retail spending, and economists expect the sector to keep strengthening to pre-global financial crisis levels.
Retail trade rose 0.5 per cent in December, seasonally adjusted, and was up 0.9 per cent in the December quarter, Australian Bureau of Statistics figures show.
AMP chief economist Shane Oliver expects consumer spending to start making a much larger contribution to economic growth than it has over the past few years.
"Retail sales growth looks to be breaking out of the malaise that it's been in over the last four years that saw annual growth average just 2.7 per cent," he said.
"This likely reflects a combination of improved household finances on the back of low interest rates, rising wealth levels and improved consumer confidence. This is great news for retailers after a really tough period.
"We expect these factors to support continued strength in retail sales this year, but probably averaging around 4.5 per cent per annum as a return to pre-GFC strength is unlikely as the labour market remains soft."
Groceries had the strongest rise in the month up 2.5 per cent, followed by at 0.5 per cent gain in spending in cafe and restaurants and department store sales had a 0.3 per cent rise.
