Australia's largest retailer Woolworths has said that food inflation in April eased off in its supermarkets.

The company added that recent price inflation would have been worse were it not for intense competition in the sector.

According to Woolworths' third-quarter financial update, prices had increased by an average of 4.5% across its stores.

Speaking at a lunch organised by the Australia-Israel Chamber of Commerce, Woolworths CEO Michael Luscombe reportedly said inflation has fallen back under 4% last month. 

According to local reports, Luscombe later told reporters that produce deflation was driving the easing in the overall inflation rate in supermarkets while competition between retailers was also helping to keep prices down.

Luscombe's remarks come as an inquiry - backed by the Australian government - investigates grocery prices in the country.

The Australian government handed the Australian Competition and Consumer Commission the task in January in a bid, it said, to ensure consumers get a "fair deal at the supermarket".

The ACCC is due to publish its findings in July.