Inflation for services in Australia has hit its highest rate in more than two decades, driven by rises in the cost of insurance, rent and other essentials.

The Australian Bureau of Statistics (ABS) said today annual inflation for services rose to 6.3% in the March quarter.

That was the highest since 2001 and the first time in almost two years that services has outpaced goods inflation, which fell to 5.8% in March.

“Price increases for a range of services like … insurance are keeping inflation high,” ABS head of prices statistics Michelle Marquardt said. 

The rise in insurance was driven by higher premiums for house, house contents and motor vehicle insurance, an ABS spokesperson told insuranceNEWS.com.au. Higher charges for rent and child-care also contributed.

During April, May and June, the price of domestic holidays, electricity, clothing accessories and fuel eased, while financial services and rents each rose by 2.5%, and international holidays were up 6.2%. 

This was “a change from 12 months ago,” when fuel and new homes were top drivers, Ms Marquardt said.

In another indication of spending habits, a NAB consumer sentiment survey of around 2000 people found Australians are prioritising spending on insurance above eating out and going to the cinema as the cost of living rises. 

The poll found that during April-June, only 21% of those surveyed had cut spending on home, car and private health insurance. 

That compares with 55% saying they spent less on eating out at restaurants, 50% on buying of coffee and snacks, 49% on entertainment such as the cinema and theatre, 45% on car journeys to save on petrol, 43% on travel, 39% on food delivery services such as Uber Eats, 37% on charitable giving, 36% on major purchases such as TVs, and 30% on subscription streaming services.

These "trade-offs" to protect things they “really value” were saving Australians an average of $286 a month, NAB said.

“Australians are becoming more considered consumers,” NAB Head of Everyday Banking Claire Righetti said. “It means they can still spend on those things that really matter.”

Aside from insurance, those surveyed were least willing to cut back on house cleaning (21%), spending on pets (18%), children’s sport, dance and hobbies (12%) and private school fees (10%).