I am 55 year old male, and live in Melbourne, Australia. I injured my knee and therefore can no longer work in factories or constructions sites.
I know how to use computers and internet and have a broadband connection.
I only have $ 7,000 cash to invest.
I would like to try self employment such as doing business online etc.
I have trouble coming up with ideas. can you suggest a small business I should start online.

Maybe you could consider some online businesses in your passionate areas. It could be in the form of selling digital products, doing some affilitate marketing, pay per click, etc.
See: http://www.internetbusinessmodelonline.com and you might be able to get some ideas from there.