Health Minister David Clark has set up an urgent Ministerial Advisory Group on the health system, saying "all is not well".

It follows the announcement last night that Director General of Health Chai Chuah will resign on February 2 next year, citing controversy in a system that reportedly suffers from low morale, lack of trust and poor relationships between the ministry and health boards.

"At this time it is increasingly important for the sector to operate in a unified way if we are able to accelerate and further embed the gains we have already made. For that reason I have decided to conclude my time early," Chuah said yesterday.

A performance improvement report from the State Services Commission and the next stage of the independent inquiry into Havelock North drinking water to be released in coming days are expected to criticise the ministry.

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While in Opposition, David Clark was highly critical of Chuah over an embarrassing Budget blunder that saw $38 million wrongly allocated to DHBs. This morning Clark said it was the right call for Chuah to stand down so fresh ideas, new leadership and unity can be brought in.

The advisory group will be chaired by Sir Brian Roche and include Professor David Tipene-Leach, Muriel Tūnoho, Dr Karen Poutasi and Dr Lester Levy. They will sit for a term of two years and report directly to the Minister of Health.

"The Ministerial Advisory Group will help ensure that investment makes a positive difference to people's lives. It will provide fresh perspective and independent advice about how we can improve our health system and deliver better services to New Zealanders," Clark said.

"We're committed to investing an extra $8 billion in health and it is vital to have a health system in its best shape possible to ensure all New Zealanders can access quality health and disability services."

Roche is a former chief executive of PWC NZ, and oversaw a significant transformation as chief executive of the New Zealand Post Group. He is an experienced chair of numerous Crown and private entities.

Tipene-Leach is a professor of Māori and Indigenous Research at the Eastern Institute of Technology. He has a distinguished medical practice and academic history, and has led innovative public health projects on prevention of long-term conditions, particularly diabetes.

Tūnoho is president of E tū, one of New Zealand's largest unions and national coordinator for Healthcare Aotearoa, which represents many community and iwi-controlled primary health providers. She is also involved with Hutt Union & Community Health Service and is an executive member on the Living Wage Movement Aotearoa board.

Poutasi is a former Director-General of Health. She oversaw the establishment of district health boards and the amalgamation of the former Health Funding Authority with the Ministry of Health.

Levy is chairman of the three Auckland DHBs, and has a wealth of experience in other private and government governance roles.