Alleged plot 'beyond disturbing': Baird

NSW has avoided a potential "catastrophic" terrorist attack, Premier Mike Baird said.

Two men were arrested at a house in Fairfield on Tuesday after a police raid.

They were on Wednesday charged with carrying out actions to prepare or plan for terrorist acts.

Police allege they had possession of a machete and a hunting knife and a video of a man talking about carrying out an attack.

"It was beyond disturbing, what was planned," Mr Baird said on Wednesday.

"Certainly, something catastrophic was avoided yesterday and for that we should be very thankful."

Mr Baird reminded the community not to be complacent and urged them to report any suspicious activity to authorities.

The men, aged 24 and 25, will appear in Fairfield Local Court on Wednesday.