The translation of esse/essa/isso always falls in a gray area, because English only have two demonstratives. Most of the times, just like in this case, you can translate it as this or that, but in the context of referring to something that someone said or did, that is more commonly said, so you'll usually hear phrases like "who told you that", "that's a good idea" or "that's great".
"This" is near me (the speaker). "That" is not as close to the speaker. If we want to talk about something that is farther away, we say, "That one over there", which would be equivalent to 'aquele/aquela' in Portuguese. It IS a gray area, though. I might say, "I like this blouse, not that one" even when the two blouses are next to each other. In that case, "this" shows an emotional closeness rather than a physical closeness. In many cases, you can use either one, with only a slight change in meaning.