SYDNEY, Nov 21 (Reuters) - The head of Australia's central bank on Tuesday said that inflation is the crucial challenge over the next one or two years after policymakers raised interest rates to a 12-year high earlier this month to tame high prices.

Speaking at a panel discussion in Melbourne, Reserve Bank of Australia Governor Michele Bullock said she was increasingly optimistic about the strength of the labour market, adding that immigration is ultimately beneficial to the economy.

(Reporting by Stella Qiu; Editing by Shri Navaratnam)