Stuart Ayres has resigned from NSW cabinet and as deputy Liberal leader after a draft government review into John Barilaro’s US job appointment found he may have breached the ministerial code of conduct.

Premier Dominic Perrottet said the resignation followed a briefing he received from the Department of Premier and Cabinet on Tuesday.

The draft report “raised a concern as to whether Mr Ayres had complied with the ministerial code of conduct”, Mr Perrottet said on Wednesday.

“When I put these matters to Mr Ayres, he offered his resignation from the ministry and as deputy leader of the Parliamentary Liberal Party,” he said.

Mr Ayres will remain as the MP for Penrith, but has relinquished all his portfolios, which include enterprise, investment and trade, tourism and sport, and western Sydney.

Mr Perrottet said the review led by former NDIS commissioner Graeme Head raised questions about Mr Ayres’ conduct.

“The review clearly demonstrates that the process was not at arm’s length,” he said.

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He noted that Mr Ayres “denies any wrongdoing at all” in the recruitment process in which Mr Barilaro was given the plum job over public servant Jenny West, who was originally told she had been chosen for the trade commissioner’s role in New York.

Mr Ayres issued a statement denying he had breached the ministerial code, but agreed “it is important that this matter is investigated appropriately”.

“I have always applied the highest levels of integrity in my conduct as a minister.”

Mr Perrottet did not specify how Mr Ayres had potentially breached the ministerial code of conduct.

“There is no doubt that there are questions raised … and appropriately I’ve called for a review … whether there has been a breach,” he said.

The appointment of former deputy premier Mr Barilaro to the US trade envoy position with an annual salary of $500,000 in June has plagued the government for nearly two months.

Mr Barilaro relinquished the position two weeks after it was announced amid allegations of “jobs for the boys”, conceding his appointment was untenable and a distraction.

But Mr Perrottet defended not sacking Mr Ayres earlier.

His resignation came just three days after fair trading minister Eleni Petinos was sacked over bullying and workplace harassment allegations.

“I make decisions on what I believe is right and I’ll always do that no matter what the political cost to me,” Mr Perrottet said.

“When issues arise and mistakes get made, ministers are accountable for that and minister Ayres has paid a very heavy price.”

The recruitment process is also the subject of a NSW parliamentary inquiry. It resumed on Wednesday, with Investment NSW CEO Amy Brown giving evidence for a second time.

Opposition Leader Chris Minns said Mr Perrottet’s decision was in the “public interest”.

“Minister Ayres was taking up a lot of attention and that attention deserves to be with the people of NSW,” he said.

Daniel Mookhey, a member of the parliamentary committee investigating the controversial appointment, said it was disappointing that Mr Perrottet had allowed his government to “succumb to paralysis”.

He called on the government to refer the matter to the Independent Commission Against Corruption if needed and for Mr Perrottet to be transparent about Mr Ayres’ missteps.

“ICAC does have the power to find the ministerial breach of conduct as corrupt so we do need the premier to explain what was Stuart Ayres’ offence against the code and did he have to make a referral to ICAC,” he said.

Mr Perrottet said a new deputy leader would be elected next week but did not say if a cabinet reshuffle was on the cards.

Despite the unfolding crisis, he maintained his government was strong and voters should look at his “track record”.

“This is a difficult time for us but ultimately we’re a very good government,” he said.

-AAP