The Australian Bureau of Statistics (ABS) reported that annual inflation for services rose to 6.3% in the March quarter, the highest it has been since 2001. This is also the first time in nearly two years that services inflation has exceeded goods inflation, which fell to 5.8% in March.
Reasons Behind the Inflated Insurance Costs
ABS Head of Prices Statistics, Michelle Marquardt, stated that "price increases for various services, including insurance, are driving the high inflation rate."
The surge in insurance costs can be attributed to higher premiums for house, house contents, and motor vehicle insurance, according to an ABS spokesperson. Additionally, increased charges for rent and childcare have also contributed.
Shift in Spending Habits
A recent NAB consumer sentiment survey of approximately 2000 individuals revealed a change in spending habits as the cost of living rises. Australians are now prioritizing spending on insurance over eating out and going to the cinema.
During the months of April, May, and June, prices for domestic holidays, electricity, clothing accessories, and fuel have decreased. However, financial services and rents saw a rise of 2.5%, and international holidays increased by 6.2%.
Michelle Marquardt noted, "This is a change from 12 months ago when fuel and new homes were the primary drivers of inflation."
Australians Protecting Valued Possessions
The NAB survey also revealed that only 21% of respondents reduced spending on home, car, and private health insurance during the same period. On the other hand, 55% reported spending less on eating out at restaurants, followed by 50% and 49% who reduced spending on coffee and snacks, and entertainment (cinema and theatre), respectively. Additionally, 45% cut down on car journeys to save on petrol, 43% on travel, 39% on food delivery services like Uber Eats, 37% on charitable giving, 36% on major purchases like TVs, and 30% on subscription streaming services.
These "trade-offs" to protect valued possessions are allowing Australians to save an average of $286 per month, according to NAB.
Claire Righetti, NAB Head of Everyday Banking, commented, "Australians are becoming more mindful consumers, enabling them to continue spending on the things that truly matter."
Areas Australians Are Reluctant to Cut Back On
Aside from insurance, the survey revealed that Australians were least willing to reduce spending on house cleaning (21%), expenses related to pets (18%), children's sport, dance, and hobbies (12%), and private school fees (10%).
