Last week, Moody’s credit rating agency warned that Australia was on the brink of losing its AAA status – a move that could push up borrowing costs for both the government and the banks.

In itself, the news is not central to the question of whether Australia will navigate the next few difficult years and return to growth – though you might not know it by the coverage it received.

The news was seized upon by small-government ideologues as evidence that the sky was about to fall, and to renew calls for lower taxes and lower public spending.

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Ideologies don’t spread by themselves. Media outlets must do that work, and nowhere is it done with more tenacity than at The Australian newspaper.

On Friday its headline was ‘Treasurer Scott Morrison stares down Moody’s credit threat‘ – an article describing how Mr Morrison would heroically stick to the mantra of ‘it’s a spending problem, not a revenue problem’.

On Saturday the paper lumped together public servants and welfare recipients so as to be able to claim that ‘One in two voters is fully reliant on public welfare’ – a pretty loose use of the term ‘welfare’.

And it dutifully ran a piece quoting John Roskam – a former academic and now head of a think tank – who disparaged a group of other academics and public servants who had urged the government not to cut taxes at this time, as having no “real world experience”. Just a whiff of irony there.

But the most revealing article came from veteran political commentator Paul Kelly, who admitted in his weekend piece that: “Sure, [a credit downgrade’s] actual impact might be marginal. It would only occur in the next term. But its political symbolism would be devastating.”

Hmm. And which news media organisation would be best placed to make the “marginal” change “devastating”?

Mr Kelly’s own employer, News Corp, of course. It claimed last week, after introducing a new audience measurement methodology, that “our cross-platform audience is now bigger than Facebook’s … no one comes close to the reach and engagement that we have with Australians”.

Why do I not find that reassuring? Oh yes, I used to write for a competing publication, Business Spectator, which News Corp bought and later shut down.

Pragmatism vs ideology

The next few years are crucial for Australia’s future prosperity, and going into them focusing on ‘debt and deficit’ metrics would be disastrous.

As detailed previously, the evidence that credit downgrades spell disaster just isn’t there.

If a downgrade caused any real grief, it would be to the banks’ mortgage books, bloated as they are with wholesale funding from abroad – something for bank shareholders to think about.

Australia’s wealth, as economist Ian McLean explained in his 2013 book Why Australia Prospered, is not determined by top-line figures such as debt-to-GDP, tax-to-GDP or expenditure-to-GDP. It’s the detail within those catch-all figures that matters.

Mr McLean’s book, hailed by eminent economist Ian Harper as an “outstanding piece of scholarship”, debunks simplistic ideas that Australia became wealthy purely through the good luck of its natural endowments or location.

He argues that Australia made its own luck much more than is commonly supposed, through its unique combinations of human and physical capital, and its willingness to junk institutions that stood in the way of progress.

Oh, and public debt didn’t have a lot to do with it, as another economist, Philip Soos, has argued.

Don’t overlook human capital

Looking at the economy through the McLean lens, it’s no longer possible to take for granted the world-class education and healthcare that Australians enjoy and that, in recent years, have been propped up by borrowing. They’re not just a luxury – they’re part of the economic success.

It is also no longer possible to ask questions such as “how is public debt ruining the economy?”, because it is simply not.

Slashing public spending at this time, or refusing to consider allowing the overall tax take to rise to cope with the health and welfare challenges of an ageing population, are not primarily economic ideas – they’re lunges towards an ideological nirvana.

What’s needed, in contrast, is a steady hand – the acceptance of reasonable levels of debt to help the economy transition away from the mining investment boom, without abandoning the services that have helped build our human capital.

But that kind of approach would require a government and a Treasurer prepared to ‘stare down’ the ‘political devastation’ that Australia’s most politically powerful newspaper group can inflict.

And we haven’t had one of those for a very long time.

Read more columns by Rob Burgess here