The axe has fallen on ACC chairman Ross Wilson.

ACC Minister Nick Smith has announced the appointment of former Ernst & Young chief executive John Judge as the new chair of the board of ACC.

In short press release, Dr Smith said ACC needed a "fresh start" to face up to its serious funding issues.

"I am not satisfied that the current board has the right skills to navigate this very large enterprise out of financial trouble and I intend to make further changes to strengthen ACC's governance and lead a new strategic direction," Dr Smith said.

"I am considering in consultation with the new chair issues of Board continuity and I am leaving open the option of some of the current board members being re-appointed. The new board will be in place by the end of March."

Dr Smith said the Government was committed to securing the future of ACC and the no-fault insurance model.

"Strengthening the board is the first step - changes to legislation and policy will also be required," Dr Smith said.

Labour's ACC spokesman David Parker said the sacking was politically motivated to ensure ACC had a board was willing to slash ACC cover.

Prime Minister John Key did not agree the sacking was politically motivated.

ACC was facing "significant issues" and Dr Smith believed he needed a stronger board guide it through difficult times, Mr Key told journalists.

The first move was to appoint a new chairman, then work with him to decide who would be sacked and who would stay.

Asked what the ACC board had done wrong, Mr Key said it depended on what was defined as wrong and the minister simply had no confidence in board.

"We can spend an endless time going in a circular argument.. what we are prepared to say is ACC faces a $22 billion liability, there's been a blow out in the costs that have to be met - one way or the other," Mr Key said.

The scheme would have to be looked at "in part", but National remained committed to the fundamental principles of ACC.

Labour leader Phil Goff said there was no justification for the sacking.

"We've got a very clear pattern here of the Government acting in a highly partisan way to remove competent and efficient people solely on the basis of their perceived political affiliations."

There was barely a company in the world which had not lost money on investments recently and it came down to a "political witch hunt", Mr Goff said.

"This seems to be a recurring pattern across Corrections, across health and now across the ACC."

Dr Smith wrote to board members last week saying he was not happy with its performance and he intended to make changes.

Under the law he can replace them at any time.

Mr Wilson has a long history with ACC and also once headed the Council of Trade Unions (CTU).

Last week, Dr Smith said ACC entitlements would have to be cut in response to a blow-out in treatment costs and growing liabilities.

The alternative of large increases in levies for workers, employers and motorists was not acceptable.

Under Labour, ACC had stopped acting as an insurer and become a welfare agency, said Dr Smith.

The Government has pointed to areas such as free physiotherapy as targets for cuts and Dr Smith said he would be talking to that sector before changes were made.

The growth in liabilities was more difficult to contain as it largely tied to the collapse in international equities and volatile assessments of the actual liability.

- NZPA