Scott Morrison is swinging an axe through the public service with several department heads bound for the chopping block.

The prime minister is slashing the number of government departments from 18 to 14 in an effort to cut red tape and improve services.

"Having fewer departments will allow us to bust bureaucratic congestion," he told reporters in Canberra today.

Scott Morrison has announced four government departments will be axed. (AAP)

Several department secretaries will be sacked in the purge.

Four new mega departments will be created early next year: Education, Skills and Employment; Agriculture, Water and the Environment; Industry, Science, Energy and Resources; Infrastructure, Transport, Regional Development and Communications.

Labor deputy leader Richard Marles urged the prime minister to tread carefully.

"Obviously the public service has a very significant role to play and there needs to be stability within the public service," Mr Marles told Sky News.

"I think it's really important - particularly at this time, given all the challenges that we're facing - that the government is managing the public service in a way which maintains stability and ultimately maintains morale."

Earlier this year, the prime minister said the Australian Public Service needed to "evolve" and in some cases "conventional wisdom needs to be challenged".

He also called for "congestion-busting" to encourage new ideas on how to improve services.

The news has come as a shock to Mike Mrdak, who found out his Department of Communications would be axed yesterday.

Mr Mrdak's department is to be incorporated from February into a newly established Department of Infrastructure, Transport, Cities, Regional Development and Communications.

"I was told of the government's decision to abolish the department late yesterday afternoon," Mr Mrdak said in the memo.

"We were not permitted any opportunity to provide advice on the machinery of government changes, nor were our views ever sought on any proposal to abolish the department or to changes to our structure and operations."

He said he would work with staff to make the transition as seamless as possible.

"I will keep everyone regularly advised of what is proposed and what is happening.

"I will do my best with our SES (executive) team to ensure that there is as much certainty as possible for all of you, and our agencies, and a continuity of services for the community we serve."

Mr Mrdak said Australia had the best public service in the world.

"Long may it continue to be so."

Liberal member for Chisholm Gladys Liu. (AAP)

At the same press conference, Morrison ducked questions about embattled Liberal MP Gladys Liu demanding the party repay her $100,000 donation.

Ms Liu contributed the money to her own federal election campaign earlier this year but has reportedly asked for the six-figure sum to be paid back, claiming it was a loan.

"That's a matter for the Victorian division of the Liberal Party. I was a state director a long time ago. That is no longer my job," the prime minister told reporters.