Reserve Bank of Australia Governor Michele Bullock has indicated that an increase in the unemployment rate would contribute to easing inflationary pressures, though she declined to reveal whether she would support a rate hike at next week's policy meeting. Speaking at a panel discussion in Sydney on Tuesday, Bullock noted that the current unemployment rate of 4.5% suggests the labor market is "a bit tight."

"I think an unemployment rate between 4.5% and 5% would probably be sufficient to cool the labor market and thereby reduce inflationary pressures," she said. Australia is scheduled to release its August employment data on Thursday, with economists forecasting the unemployment rate to hold steady at 4.5%.

Bullock explained that the underlying issue with persistently high inflation is that economic demand exceeds the economy's capacity to supply goods and services, with the tight labor market serving as one indicator of this supply-demand imbalance. The central bank is set to announce its interest rate decision next Tuesday.

Swap market pricing currently indicates an approximate 90% probability that the Reserve Bank will raise rates by 25 basis points next week. Following three consecutive rate increases earlier this year, the central bank has held rates steady. Some economists anticipate a further 25-basis-point hike in November, which would lift the benchmark rate to 4.85%, the highest level since late 2008.