Prime Minister Julia Gillard is wary of an economy where the only signs of strength are in the mining sector, after hundreds of jobs were slashed in the banking and manufacturing sectors.
But Opposition Leader Tony Abbott warns there will be further losses unless the federal government's forthcoming carbon and mining taxes are scrapped.
This week, Holden, Mortein-maker Reckitt Benckiser and Westpac announced major job cuts.
Ms Gillard said trade-exposed sectors, like manufacturing, were being put under pressure by an Australian dollar that is being driven higher by a strong economy that has low unemployment and low debt.
"So in this time of change we've got to be working with those sectors to make sure that they come through and we continue to have a diversified economy with lots of areas of strength," she told Canberra local radio.
"I don't want to wake up in ten years' time and the only strength in the Australian economy is mining."
But Mr Abbott said the dollar's strength was not the only problem facing the economy, citing concern over the Fair Work Act, and the carbon and mining taxes.
He said a coalition government would provide a better environment for business.
"The extra taxes we can take off. The red tape we can reduce it. The Fair Work Act we can make more business friendly, more job friendly," Mr Abbott told the Nine Network.
Still, a new report by Council of Australian Government (COAG) Reform Council shows that current attempts to reduce red tape nationally have hit some major sticking points.
The annual report has raised concerns that 12 out of the planned 49 reforms for a seamless national economy are in danger of not being completed by December this year as originally agreed within COAG in 2008.
They include the harmonisation of the occupational health and safety (OH&S) laws and a national trade licensing system.
Ms Gillard said federal, state and territory governments needed to ensure national regulations were put in place to lift productivity and allow for a more efficient workforce.
"As we build a new economy in response to the structural changes afoot because of the relatively high dollar, these objectives are more important than ever," she said.
But Victorian Premier Ted Baillieu said he would not agree to the OH&S proposal because it would damage productivity and lead to job losses.
"We are not going to allow Victorian businesses to be set back in the name of going to the average on a national reform," he told reporters in Melbourne.
The economy is likely to be the centre of debate when federal politicians return to Canberra for the first sitting weeks of the year on Tuesday, coinciding with the Reserve Bank of Australia's (RBA) first board meeting of 2012.
The central bank is widely expected to cut the cash rate again at the meeting, but the major banks have warned they may not be able to pass on any reduction to their customers in full because of their rising funding costs in overseas markets as a result of the European debt crisis.
Westpac boss Gail Kelly, who plans to axe more than 400 jobs and send 150 more offshore, refused to speculate about whether her bank would pass on any cut to the official cash rate.
"We'll just to wait and see what actually happens next week," she told ABC Radio.
