Parlour won three league titles with the Gunners during his extensive career in north London so is well-versed to know what is required to become champions.
The Reds currently sit second on the table and although Parlour believes there is a main contender in the form of Manchester City, he is of the belief that the Merseyside outfit has what it takes to end the 2013/14 campaign at the summit of the standings.
"The firepower that Liverpool have got with (Luis) Suarez and (Daniel) Sturridge - these youngsters are playing a lot better as well - they're playing really well," he told Sky Sports Football Club on Sky Sports News Radio.
"If you look at the firepower you'll always have Suarez and Sturridge in your team probably more than (Arsenal's Olivier) Giroud."
The former England international added: "I still think (Man) City are the ones to beat.
"I just think the squad they've got, the firepower they've got up front - (Sergio) Aguero is going to be important, he needs to get back very soon - they've got that little bit more than the other teams.
"But certainly Liverpool (stand a chance) with their firepower and the way they're playing, the way Brendan Rodgers is going about every game."
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