The Abbott Government could reclaim the millions paid to the ABC's Australia Network and use the cash to promote Australia to the world on Twitter and Facebook.
Foreign Affairs Minister Julie Bishop says the money being spent on "soft diplomacy" through the national broadcaster's Asian TV network might be better invested in social media.
The idea comes as the Government considers scrapping the Australia Network amid furious complaints by some MPs the ABC is biased against the coalition.
Managing director Mark Scott said yesterday the ABC should have been "more precise" in its reporting of asylum seekers' claims they had suffered burns caused by their treatment by the Australian navy.
"The ABC has always presented the allegations as just that - claims worthy of further investigation," Mr Scott said.
Yesterday, Ms Bishop told The West Australian she was seeking legal advice on the ABC'S contract to run the Australia Network.
She said the Department of Foreign Affairs and Trade had only a small pool of money with which to showcase Australia and diplomats would welcome extra funds to do that work.
"DFAT currently has a budget of $4 million a year to spend on public diplomacy globally," Ms Bishop said.
"Imagine if DFAT had the budget which included the $22 million per year otherwise spent on the Australia Network. It's arguable that we could find more effective ways to promote Australia, including through social media."
The Australia Network was established to advance Australia's image through the region and beams news, drama and sport to neighbouring countries.
In 2011 the Gillard government cancelled a tender that was to award the $223 million 10-year Australia Network contract to Sky News and gave it to the ABC.
It is understood the Government could be liable to pay a breach of contract clause to the ABC should it strip it of the Australia Network contract. The breach of contract penalty could be tens of millions of dollars.
Ms Bishop said she believed the ABC had failed to meet benchmarks in servicing the contract.
Prime Minister Tony Abbott last week blasted the ABC for its coverage of asylum seekers and US security leaks, saying the national broadcaster was "taking everyone's side but Australia's".