The man who stood side-by-side with then prime minister John Howard in the United States during the aftermath of the September 11 terrorist attacks is now Tony Abbott's top public servant.

Michael Thawley is the new secretary of the Department of the Prime Minister and Cabinet after incumbent Ian Watt's surprise resignation two years before his term was due to end.

In a message to staff, Dr Watt wrote he had wrapped his family life around his public service for 30 years.

"The proportion of my life absorbed by work has grown over time, with significant increases when I first became a portfolio secretary and, more recently, when I became secretary of PM&C.  It is now time for me, instead, to wrap work around my life," he wrote.

"I will miss my job greatly but, I suspect, much more than my job will miss me."

Seven department heads have now either been sacked or have resigned since Mr Abbott came to power almost a year ago.

Mr Abbott said Mr Thawley, who was appointed for five years from December 1, had already provided significant service to Australia and brought a wealth of experience to  the public and private sectors.

He was Australia's ambassador to the United States between 2000 and 2005, when Australia successfully concluded the Australia-US Free Trade Agreement and was a vital liaison to the Bush administration following  al-Qaeda's attacks.

Mr Howard wrote in his autobiography Lazarus Rising that as US ambassador Mr Thawley proved "outstanding", with other envoys "drooling at the access he obtained".

"He had been my first adviser on foreign policy and defence and was a calm but aggressive thinker," Mr Howard wrote.

Mr Thawley was the pipeline of information between the Bush administration and the Howard government during the decision to go to war against Saddam Hussein's Iraqi regime.

In 2006 media reported that Mr Thawley,  as ambassador to the US,  had lobbied Congress to drop an investigation into allegations that Australia's wheat exporter paid kickbacks to Hussein's regime.

The AWB investigation was ultimately dropped, despite the US government having information that an AWB wheat contract might have been inflated to cover kickbacks to Iraq.

During his career, Mr Thawley has held a number of senior Australian government positions, including in the Department of the Prime Minister and Cabinet, the Department of Foreign Affairs and Trade and the Office of National Assessments.

He advised former prime minister Paul Keating on international affairs. Don Watson wrote in Recollections of a Bleeding Heart: A Portrait of Paul Keating that Mr Thawley was a very good adviser who was conservative in his politics.

Mr Abbott's statement on Thursday said, "Most recently Mr Thawley has been senior vice president of Capital Research and Management Company and of Capital Strategy Research Inc, one of the world's largest investment management businesses."

US Studies Centre lecturer Tom Switzer said he had thought Mr Thawley was content in the private sector before he heard Thursday's announcement.

"There are no downsides to this appointment," Mr Switzer said.

"He's presumably given up a lot to be back in the public service – I've got no doubt he'll give [the Prime Minister] frank and fearless advice."

He could not say for certain whether Mr Thawley would be taking a pay cut in returning to the bureaucracy. Both men are "Americanophiles" who considered a senior foreign policy adviser to Mr Abbott,  Andrew Shearer, and former prime minister Howard as mutual friends.

Mr Thawley's appointment follows the resignation of Dr Watt, who received an annual salary of more than $800,000.

Mr Abbott said Dr Watt had had a long and distinguished career at the highest levels of the Australian Public Service including appointments as the Secretary of the Departments of Communications, Finance, Defence and the Department of the Prime Minister and Cabinet.

"He has served successive governments with distinction and his contribution to public administration in Australia has been wide ranging," Mr Abbott said.

"On behalf of the government, I thank him for his years of dedication to the Australian Public Service and I look forward to his future contributions to our community."

In his message to staff, Dr Watt wrote:  "As to my very future, I have no plans to retire. I intend to spend a bit more time with my wife, I have a lot of travelling to catch up on and I have a book to write (but not one about government). I will take a few months off and then see what the future holds for the next stage of my career."

High-ranking secretaries in the federal bureaucracy who served in the previous Labor era of government are slowly leaving the public service.

Treasury secretary Martin Parkinson was due to leave this year.

Finance Department secretary David Tune and Attorney-General's Department boss Roger Wilkins resigned earlier this year.

Just after Mr Abbott won office, he sacked Industry Department head Don Russell, Energy boss Blair Comley and Agriculture secretary Andrew Metcalfe.