The Australian delivered a third straight day of outrageous reporting on Macquarie Group this morning, but has already started backing off after the stock soared 31% in morning trade and numerous commentators attacked.

While Kevin Rudd is attempting to score political points over Malcolm Turnbull’s very mild disagreement with the Reserve Bank governor over the phrase “light years away”, the PM really should be turning his guns on Rupert Murdoch’s flagship Australian paper.

It all started with this story by Adele Ferguson on Wednesday claiming Macquarie must refinance $45 billion in debt by March next year.

The corporate plod released this statement promising to get tough on people spreading false rumours and the Millionaire Factory lashed out at The Australian.

Rather than pulling its head in, this so-called quality broadsheet ploughed on. The Australian hit back at our criticisms on page three today with this attack on Crikey, but then exacerbated the situation with the following paragraph in this morning’s splash:

Macquarie Group shares plunged by 23% to a 5 year low on fears about its ability to refinance billions of dollars in debt, with analysts at JP Morgan saying the slump shows the investment bank is “irrevocably broken”.

The analyst concerned, Brian Johnson, was clearly mortified as that paragraph has now been changed to the following in the online version of the story:

Shares in the diversified investment bank plunged 22 per cent to $26.05. The selling was exacerbated by a report from JP Morgan’s banking analyst Brian Johnson who said the share price direction indicated the Macquarie model was broken.

Even that line is completely misleading. If you actually read Johnson’s report and listen to his commentary that Macquarie represents “compelling value” and has a price target of $71.58.

After ABC radio’s Stephen Long beat up Johnson’s “irrevocably broken” line on PM last night, the analyst himself fronted Lateline Business and put the whole matter to rest.

But that didn’t stop The Australian producing a story in the business section today headlined: “Macquarie irrevocably broken: analyst”. This has now been changed in the online version to “Macquarie mauled as hedge funds attack”.

Citigroup released a report this morning which opened up as follows:

We believe inaccurate perceptions over Macquarie Group’s capital and funding positions have moved its share price sharply lower this week. As per our recent research, we view Macquarie Group’s balance sheet as solid, its funding position favourable, its capital position comfortable and refinancing risk manageable.

And Charlie Aitken has perfectly summed up the overall strategy of the shorting hedge funds in these comments sent to clients yesterday. The really sad thing is that The Australian has been prepared to be used in such a way. At no point in its coverage has it disclosed that it is still involved in active litigation brought by Macquarie Group that began in 2006.