MELBOURNE: Australia extended their lead to 347 runs at tea on day three of the Boxing Day test after New Zealand crumbled under a furious pace assault to be bowled out for 148 on Saturday.

Openers David Warner and Joe Burns led Australia to 28 for no loss at the break on a hot and muggy afternoon at the Melbourne Cricket Ground.

Warner was 16 not out, with Burns on four.

Defending a big first innings total of 467, Australia's pacemen crushed New Zealand's hopes of a series-levelling victory by routing the visitors' remaining batsmen after lunch.

Fast bowler Pat Cummins finished with 5-28, with fellow quick James Pattinson claiming 3-34.

New Zealand, who trail the three-match series 1-0 after losing the opener in Perth, had resumed on 102 for six after lunch, with opener Tom Latham tasked with an improbable rescue mission.

Latham brought up his half-century but promptly gave up his wicket for 50, edging a Cummins delivery behind to wicketkeeper-captain Tim Paine.

All-rounder Mitchell Santner, who had survived an appeal for a catch before lunch after the ball appeared to graze his glove, was out for three nicking Pattinson.

The tail added 32 runs with some lusty swinging before Cummins and Mitchell Starc halted their charge.

Cummins notched his fifth victim by removing Tim Southee for 10 before Starc grabbed his second and wrapped up the innings by bowling Trent Boult for eight.

New Zealand had resumed in the morning at 44 for two, needing Latham and Ross Taylor to pull them to safety.

They instead lost three wickets by the morning drinks break in one dizzying hour of furious pace bowling.

Cummins struck twice in his second over, removing Taylor for four and Henry Nicholls for a golden duck in consecutive balls.

Pattinson missed out on Latham's wicket when Steve Smith grassed a chance in the slips, but the paceman later banged in a short ball to have wicketkeeper BJ Watling caught for seven.

All-rounder Colin de Grandhomme stayed for a shaky 11 before he was caught nibbling at a short Starc delivery.