This study estimated the relative contributions of identified cost drivers for health services in the Northern Territory from 1979/1980 to 2006/2007. A decomposition model was used to analyse the relative contributions of the potential determinants of the growth in health expenditure. The analysis indicated that there was a shift in the drivers of growth in health expenditure during the study period. Between 1979/1980 and 1992/1993, the increase in health expenditure was mainly driven by service access for rural and remote residents and inflation, each of which accounted for about one-third of the increase in health expenditure. Since 1993/1994 onwards, service access was overtaken by Aboriginal ageing as the leading driver of the health expenditure, followed by population increase. The contribution of inflation halved in the later period. The impact of alternative assumptions for decomposing health expenditure increase was also investigated. The study indicated that Aboriginal ageing, coincident with an epidemic of preventable chronic diseases may be behind the recent increase in health expenditure.