China's next high-profile export

I was talking to a very smart friend about this a while ago. During Australia's last bout of high inflation just before the GFC, he noted that there were very similar problems observed in the US, UK, Canada, NZ and Germany. Today, however, many big developed countries have large output gaps (ie, excess productive capacity), and are not, therefore, likely candidates for high inflation, or so the logic goes (obviously the UK is one curious exception). This then suggests Australia might not have the same inflation challenges in 2011. I said to my friend, But what happens if we start importing inflation from other key trading partners, like China, India, and South Korea, all of which are struggling with price pressures? He did not deny that this could undermine the output gap thesis. Along these lines, this Reuters article does a good job of explaining how inflation could become China's most high-profile export. Not so good news for Australia--we import more from China than any other country.