The former head of the federal Treasury, Ken Henry, has agreed to work as a part-time economic adviser to the Prime Minister.

The appointment was revealed by Dr Henry's successor during a Senate hearing.

Dr Henry stood down from the role of Treasury secretary after 10 years earlier this year, handing over to Martin Parkinson, formerly the secretary for the Department of Climate Change.

Prime Minister Julia Gillard says the Governor-General appointed Dr Henry as a special adviser to her portfolio.

She says Dr Henry is currently on extended leave and taking a well-deserved break after years of outstanding service.

"I will be having further discussions with him on the details of the advisory role closer to his return from leave," Ms Gillard said in a statement.

"I am pleased Dr Henry's extensive knowledge and experience remains available to the Australian Government."

Treasurer Wayne Swan also says it is a good appointment.

"Dr Henry is highly regarded by the Prime Minister and by everyone in the Government," he said.

"He indicated a desire to move on. We indicated a desire to tap into his expertise and as a consequence of that, he is in a part-time role with the Prime Minister."

- ABC/AAP