SYDNEY - Australia was on the verge of a 3-0 series sweep after reducing Sri Lanka to 225 for seven with a slender lead of 87 at close of play on a dramatic third day of the third test yesterday.

The hosts dominated the morning courtesy of a sparkling unbeaten century from Matthew Wade before declaring at 432-9 with a first innings lead of 138 just before lunch.

The tourists stormed back in the second session on the back of a century partnership between Dimuth Karunaratne with 85 runs and skipper Mahela Jayawardene with 60 runs to fleetingly raise the prospect of a first ever Sri Lanka test win in Australia.

Karunaratne fell short of his maiden test century soon after tea with his country still six runs in arrears, however, and Sri Lanka then crumbled to lose six wickets for just 93 runs.

"It could have gone pear-shaped quickly," Wade told reporters. "It could have gone the wrong way for us this afternoon but luckily enough our bowlers were good enough and they did well to pull it back."

Tillakaratne Dilshan departed for five after just half an hour of the Sri Lanka innings but Karunaratne soon indicated he was in no mood to capitulate. The 24-year-old lefthander, playing only his fourth test, smashed 11 boundaries in his 109-ball knock - the best of them a huge lofted six over long-on with which he brought up his second test fifty.

He survived a big scare on 54 when he was dropped behind by Wade but departed soon after tea when the wicketkeeper held on to the ball when Karunaratne was drawn into an edge by Jackson Bird's reverse swing.

Lahiru Thirimanne, Thilan Samaraweera, Angelo Mathews, Jayawardene and Dhammika Prasad then followed to leave the tourists floundering.

"We were very disappointed with the batting in the last session," Karunaratne said. "The wicket is turning a lot now and the Aussie guys are playing the fourth innings, so I think (spinners ) Rangana and Dilshan can do something."