SYDNEY:  The leader of Australia's biggest state economy, New South Wales (NSW), on Thursday announced his resignation from politics two years out from the next election, citing ill-health in his family as one reason for his surprise departure.

State Premier Mike Baird has overseen major privatisation and infrastructure investment in Australia's most populous state, which is worth A$530 billion ($398.19 billion) and larger than the economies of Thailand, Malaysia and the Philippines.

"I said many times I didn't want to become a career politician," 48-year-old Baird told reporters in Sydney.

"I wanted to go as hard as I could for as long as I could and then step aside. Well, today, I am making good on that pledge."

The NSW economy accounts for 31 percent of Australia's gross domestic product with a population of 7.3 million.

In recent years NSW has seen sustained investment in infrastructure funded by a wave of privatisations, the most recent being the A$16.2 billion sale of power networks Ausgrid in October and TransGrid to an international consortium of funds for A$10.26 billion in November 2015.

A vote to replace Baird will be held next week, with state treasurer Gladys Berejiklian seen as the front runner.

Berejiklian has worked closely with Baird on the privatisation plans so a promotion to leadership is expected to see a continuation of current NSW economic policies.

"Berejiklian and Baird have committed to infrastructure investment through privatisations. Should she become premier, I can't see any change in that," said Peter Chen, professor of political science, University of Sydney.

The new state leader will be in place for the next asset sale by NSW, a 50.4 percent stake in Endeavour Energy that powers parts of southern Sydney and is expected to attract bids of around A$4 billion.

Baird has been Australia's most popular state leader, comfortably securing re-election in 2015, but was forced into several embarrassing u-turns last year after banning greyhound racing and restricting the purchasing alcohol across the state.

Despite those blemishes on his record, Baird had long been seen as a future leader of the country's ruling Liberal Party, especially as current conservative Prime Minister Malcolm Turnbull remains under sustained pressure.