The head of Australia's workplace watchdog, Natalie James, has lost her bid to be reappointed for a second term, with the Turnbull government announcing a new Fair Work Ombudsman on Friday.

Ms James, who was appointed by Bill Shorten when he was workplace relations minister in 2013, had recently signalled that she had hoped to be reappointed for a further five years.

Sandra Parker has been named as Australia's new Fair Work Ombudsman. Credit:Department of Jobs and Small Business

But Workplace Minister Craig Laundy on Friday announced Ms James would be replaced by Sandra Parker, a long-serving public sector official and current deputy secretary at the Department of Jobs and Small Business, following a merit-based selection process.

"[Ms Parker's] distinguished public service career, and extensive experience in complex environments including policy, regulation and service delivery roles, make her an exceptional candidate for the position," he said.