Prime Minister Tony Abbott said the Governor-General, Peter Cosgrove, approved the appointment of Ms Halton on Thursday afternoon. She has served as the secretary of the Health Department since 2002.

The Finance Department's current secretary, David Tune, is set to retire from his position on Friday.

Meanwhile, Mike Mrdak was reappointed as the secretary of the Department of Infrastructure and Regional Development for another three years.

A replacement for Ms Halton at the Health Department has not been announced, but Mr Abbott said a decision would be made soon.

Mr Abbott said Ms Halton had made a substantial contribution to the development of health policy and programs in Australia and internationally.

"She will bring considerable expertise to her new position," he said.

The Prime Minister also confirmed Treasury secretary Martin Parkinson will leave at the end of the year after being granted an extension of his contract, and he will almost certainly be replaced by someone working outside the department.

Mr Abbott said Mr Tune had had a long and distinguished career since joining in the public service in 1976.

"I thank him for his extensive contribution to the Australian community and wish him well in his retirement," he said.

"I will announce arrangements for the position of the secretary of the Department of the Treasury at a later date."

By the end of the first term of the Abbott government, change is expected in many key agencies including the Department of the Prime Minister and Cabinet.

The search for a new Treasury secretary was tipped to involve the government scouring the private sector, including the upper echelons of Australia's major banks.

Ms Halton was tipped to be a strong favourite to replace Mr Tune in late May.

Mr Tune is the fourth department head to leave the government, which sacked three secretaries shortly after it won office.