The New South Wales (NSW) government has confirmed plans to undertake an ambitious AS$1.6bn (£870.4m, US$1.2bn, €1.1bn) stadium strategy in Sydney which will see three grounds altered or rebuilt.

As part of the proposals, which were unveiled by NSW premier Mike Baird, the Populous-designed Olympic Stadium – now called the ANZ Stadium – will be downsized from a 83,500-capacity venue to a 70,000-seat stadium and reconfigured as a rectangle football stadium.

The Allianz Stadium, also known as Sydney Football Ground, is going to be refurbished rather than being knocked down and move to a site near the Sydney Cricket Ground as was originally mooted. The 44,000-capacity stadium was built in 1988 and hosts both codes of rugby and football.

In addition, the 20,000-seat Parramatta Stadium – which houses rugby league team Parramatta Eels, A-League football club Western Sydney Warriors and rugby union side Greater Sydney Rams – will be knocked down and rebuilt as a 30,000-capacity venue.

The Parramatta project will be the first one to commence as part of the strategy and will begin at the end of the year. The ANZ Stadium reconfiguration will be next and is expected to take three or four years to complete.

Baird also announced that the government was going to commit AS$40m (£21.8m, US$30.9m, €27.4m) towards a National Rugby League (NRL) Centre of Excellence fund for clubs in the state.

In a statement on his Facebook page, Baird said the stadium investment was part of a “broader vision to rebuild NSW”.

“The best city in the world deserves the best stadiums in the world,” he added.