Former treasury secretary Martin Parkinson, who was controversially sacked by Tony Abbott, will return as Australia's most senior bureaucrat in a reshuffle that will send a potent message of reassurance to a public service shaken by a series of very political sackings in 2013, redundancies, and a long and bitter pay dispute.

Prime Minister Malcolm Turnbull announced on Tuesday that his department head, Michael Thawley, had "advised me that he wishes to return to the private sector" in January and Foreign Affairs and Trade secretary Peter Varghese would become chancellor of the University of Queensland.