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by Aaron Patrick

NSW Premier Mike Baird, who is retiring from politics after just three years in the job, said his biggest regret in office was the failure of a national push to overhaul the taxation system, which appeared to be a parting criticism of Prime Minister Malcolm Turnbull.

Once one of Australia's most popular politicians, the 48-year-old surprised the political world on Thursday morning when he announced his resignation, citing the need for government renewal and family pressures, including serious illnesses suffered by his father, mother and sister.

"I've gone as hard I can for 10 years," he said. "I strongly believe now is the time to hand over to a new premier, to ensure that the focus on 2019 and beyond continues to set the agenda, and obviously that will no longer include me."

During his period in office, NSW led Australia in privatisations, housing approvals, employment growth and budget repair. The government used the sale of Port Botany and Port Kembla, the Port of Newcastle, electricity transmission company TransGrid and power distributor Ausgrid to raise billions to invest in highways, hospitals and schools.

Treasurer Gladys Berejiklian, a member of the Liberal Party's so-called moderate faction, is the leading candidate to succeed Mr Baird in a party vote scheduled for next week and has declared she will be a candidate. Finance Minister Dominic Perrottet, from the right faction, is likely to run as her deputy and could become treasurer, sources said.

Former Business Council of Australia president Tony Shepherd, who was chairman of the government's WestConnex Delivery Authority, said Mr Baird had run the best state administration in the country. "I am disappointed to see Mike going," he said on Thursday.

Biggest regret

Mr Baird said his biggest regret was the failure to reach agreement over changing the national taxation system. In 2015 he proposed raising the goods and services tax to 15 per cent from 10 per cent to pay for sharply rising health costs.

The plan appeared to be gathering momentum -– helped by a positive reaction from Treasurer Scott Morrison and interest from South Australian Labor Premier Jay Weatherill – until the newly elected Mr Turnbull ruled out changes to the GST, a decision that helped create a perception that the federal Coalition government lacked the will to make major policy shifts.

"There was a big opportunity there to do something very significant in terms of the competitiveness of the economy and the sustainable funding services in the long term," Mr Baird said. "I think that's probably the thing that frustrated me the most."

The Turnbull government did face significant opposition from Labor governments in Victoria and Queensland to the plan, which could have imposed a big political cost on the federal government while delivering a big financial benefit to the state governments.

Mr Baird, who was once touted as a potential prime minister, informed Mr Turnbull in advance of his decision to call it quits, which he made over the Christmas break. He ruled out any return to politics.

Signature policy

After taking time off the former HSBC debt banker plans to seek an unspecified position in the private sector. Head hunters said he would be in heavy demand and business leaders praised his signature achievement: the sale of electricity distribution assets for $26.5 billion that was opposed by the Labor Party, unions and elements in the National Party.

The successful privatisations of TransGrid and Ausgrid were seen as evidence that good political advocacy could overcome community scepticism towards asset sales. The process to sell 50.4 per cent of Endeavour Energy, which delivers electricity to western Sydney and elsewhere, began last month.

At times on the edge of tears, Mr Baird said he wanted to spend more time with ill family members.

His 74-year-old father, former state and federal minister Bruce Baird, recently had open-heart surgery. His mother, Judy, suffers from muscular dystrophy disorder and is under 24-hour care. His sister, ABC television presenter, journalist and author Julia Baird, recently had a recurrence of a cancer.

"There are personal circumstances that weigh upon you," Mr Baird said. "You are human."

Mr Baird's wife, Kerryn, and children Laura, Cate and Luke sat in the front row of his packed press conference. Surrounded by cameras, he hugged them before leaving the room. Advisers watched from the sidelines.

Gail Kelly, a former chief executive of Westpac Banking Corp, went on two trips in remote Australia with Mr Baird for a program called Project Uplift that gave young men and women from tough backgrounds time with community leaders. "I got to see what a genuine human being he is," she said.

7.5 out of 10

Historian and political academic Greg Melleuish rated Mr Baird's performance as premier at 7.5 out of 10.

"He started strongly," Professor Melleuish said in an email. "He was sensible on economic matters. [But] has he faced any really critical issues, I wonder? There will be problems coming in NSW with regard to such matters as health funding, as can be seen at the federal level. That will be for his successor to deal with."

Party insiders said selection of the new premier would be heavily influenced by lobbyist, faction leader and former minister Michael Photios, who didn't return a call.

The 46-year-old Ms Berejiklian, who is a member of Sydney's Armenian community, declared her candidacy in a statement about five and a half hours after Mr Baird's announcement.

Ms Berejiklian worked for the Commonwealth Bank of Australia, including as a general manager in the big retail bank, from 1998 until 2003, when she won the seat of Willoughby on Sydney's lower north shore. A former president of the NSW Young Liberals, she would be the state's second female premier, after Kristina Keneally, who was installed by Labor Party faction leaders in 2009.

'Lucky politician'

"Berejiklian hasn't prosecuted a single argument for her government," Ms Keneally said from the US, where she is visiting family. "She's a lucky politician. She had the good fortune to get out of transport before the proverbial hit the fan and the good timing to get into treasury after the tough budget decisions had been taken."

In recent months some Liberals have suggested privately that Ms Berejiklian had enough support to replace Mr Baird, whose once-sky-high popularity toppled last year during a failed attempt to completely ban greyhound racing, and controversial limits on pubs, bars and nightclubs designed to reduce inner-city violence.

"It's clear that Gladys had the numbers in the party room but I don't think she would ever would have challenged without a clear catalyst," one Liberal MP said.

Mr Baird, who became premier when his predecessor resigned over an undeclared gift of Grange, told journalists last year that he intended to fight the next election, which is due in 2019. On Thursday he said he had changed his mind.

The resignation will trigger a byelection in the seat of Manly, where he could be found on weekends sometimes surfing with his federal counterpart, Tony Abbott.

An advocate of using social media to communicate with voters, Mr Baird said he was looking forward to quitting Facebook.