RBA’s Bullock says higher unemployment would ease price pressure

[SYDNEY] Australia’s central bank chief Michele Bullock said a higher unemployment rate would help loosen the labour market and ease inflationary pressures, while refusing to reveal whether she will support an interest rate increase next week.

“At the moment, we think that is a bit tight,” Reserve Bank of Australia (RBA) governor Bullock said, referring to the current jobless rate of 4.5 per cent, during a fireside chat in Sydney on Tuesday (Sep 22).

“I think, you know, between 4.5 and 5 per cent will probably take enough heat out of the labour market that it will ease pressure on inflation.”

The governor spoke a couple of days before August jobs data is released, with economists predicting unemployment would remain unchanged.

Bullock said the underlying issue of inflation being too high is “the demand side of the economy is outstripping the ability of the economy to supply the goods and services”, and evidence of that is the labour market looks tight.

The RBA’s nine-member rate-setting board is expected to resume hiking at next week’s meeting as prospects for a near-term end to the Middle East conflict dim and inflation pressures stay elevated.

After raising rates at its first three meetings of 2026, the RBA has since stood pat, while counterparts in Europe, the US and Japan have all increased borrowing costs in recent weeks.

Bullock was asked about speculation over division between RBA staff, who are signalling they want to raise rates, and independent members of the board. The governor responded by pointing out that she is only one vote and cannot pre-empt the board meeting.

“I am not signalling anything. I am only one person on the board, so I cannot tell you what the board will want to do,” Bullock told a Committee for Economic Development of Australia conference.

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“The only thing we have been doing in the past few weeks is we highlighted after our most recent meeting that we felt that the inflation risk was skewed to the upside.”

In a follow-up question, the governor was asked whether, as one member of the board, she has thought about how she will vote next week.

“No, I am not going to talk about how I might go,” she said with a laugh. “Sorry, shocker.”

Money markets are pricing about a 90 per cent chance the RBA will lift its key rate to 4.6 per cent from 4.35 per cent next Tuesday and many economists are also of that view.

Some anticipate a follow-up hike in November that would take the benchmark to 4.85 per cent – the highest level since late 2008. BLOOMBERG