The Australian publishes erroneous report about country's PM that could lead to a withdrawal of state ads.
The Australian government has reportedly put itself on a war footing with Rupert Murdoch's Australian newspaper division after it published, and then retracted, an erroneous report about the country's prime minister.
According to the Australian Financial Review, the government has had discussions about "going to war" with the News Corporation subsidiary News Ltd and is even considering withdrawing state advertising.
There are also increased prospects to a wider review of media ownership amid concerns that Murdoch, who owns 70% of the country's papers, has too much power.
The Australian prime minister, Julia Gillard, reportedly called the government discussions after News Ltd's daily paper the Australian published an erroneous report linking her to a former boyfriend and the alleged embezzlement of union funds.
Gillard described the report as "in breach of all known standards of journalism". She was so infuriated by the false allegations that she took the unusual step of threatening legal action against the paper.
The Australian acknowledged that it had not contacted the prime minister for a comment on the story, which was subsequently removed from the paper's website. The paper also printed an apology.
"The Australian acknowledges these assertions are untrue. The Australian also acknowledges no attempt was made by anyone employed by, or associated with, the Australian to contact the prime minister in relation to this matter.
"The Australian unreservedly apologises to the prime minister and to its readers for the publication of these claims," it said.
However, the head of News Ltd, John Hartigan, said Gillard's comments were "disappointing" and "pedantic".
He said the false assertions were made in an opinion piece and "comment is rarely, if ever, sought in relation to opinion pieces" and this was "a widely understood and accepted practice in journalism".
According to the Australian Financial Review, several cabinet ministers believe the column was part of "an orchestrated campaign" across Murdoch titles.
They have reportedly been emboldened by events in the UK where politicians have re-examined their relationship with Murdoch's newspapers in the wake of the phone-hacking scandal and revelations about frequent behind-the-scenes meetings between News International executives and government ministers.
Australia's Green party has already said it will lay down a motion on 13 September to establish an inquiry into the media and there is speculation that Gillard may now give her support.
The Guardian, by Lisa O'Carroll