MELBOURNE: Spinner Nathan Lyon struck on Sunday to remove middle order batsman Henry Nicholls as Australia moved within six wickets of a series-sealing victory at tea on day four of the Boxing Day test on Sunday.

New Zealand, trailing 1-0 in the three-match series, were 131 for four at the break, still 357 runs short of their victory target of 488.

No team has ever chased more than 332 for victory in tests at the MCG.

Blundell, who replaced the badly out-of-form opener Jeet Raval, gave New Zealand fans some cheer with his second half-century in his third test.

He was 73 not out, with wicketkeeper BJ Watling on six.

After fired-up paceman James Pattinson crashed through the top order with three wickets in the morning, New Zealand resumed after lunch on 38 for three.

Blundell and Nicholls batted judiciously for more than an hour until Lyon broke through with a crafty piece of spin bowling to end their 54-run stand.

Nicholls had danced down the wicket to smash Lyon over his head for six but was stumped the next ball, reaching too far to block a delivery that dropped sharply and fizzed past the bat.

After Australia declared their second innings closed at 168 for five, Pattinson removed opener Tom Latham for eight, captain Kane Williamson for a duck and had Ross Taylor drag onto his stumps for two in the space of nine deliveries before lunch.

Latham gift-wrapped his wicket by driving needlessly at a wider delivery to nick behind to lunging Australia wicketkeeper-captain Tim Paine.

Pattinson trapped Williamson lbw in his next over and the New Zealand captain burned a referral trying to overhaul Marais Erasmus's decision.

Four balls later, Taylor was out chopping onto his stumps with a clumsy attempted cut shot.