Australia require 74 runs with seven second-innings wickets remaining to win the third Test of their series against New Zealand following a dominant display on day three of the contest in Adelaide.

The Kiwis began the day on 116-5 with Mitchell Santner and BJ Watling unbeaten at the crease, but Watling was caught for seven off the bowling of Josh Hazlewood without adding to his overnight score.

Mark Craig arrived in the middle and managed to keep the Aussies at bay with some resilient play, while Santner was able to find the boundary to move the innings along.

However, Craig was to fall for 15 when he edged a Hazlewood delivery behind to Peter Nevill for 15, but Doug Bracewell came to the crease and took the attack to Australia.

He and Santner guided the Kiwis to a lead of 150 runs before Santner was dismissed five runs short of a maiden Test half-century when he was stumped off the bowling of Nathan Lyon.

Mitchell Marsh and Hazlewood ended the New Zealand innings by bowling Brendon McCullum's men out for 208, with Hazlewood ending with figures of 6-70, to leave Australia needing 187 runs to win.

The Baggy Greens got off to a rapid start with David Warner firing early boundaries off Trent Boult and Bracewell, but Boult was to remove Joe Burns for 11 in the sixth over.

Warner and Smith guided their side past the 50-run mark, but both fell within one over of each other with Boult and Bracewell snagging the wickets to give the Kiwis hope.

However, Adam Voges and Shaun Marsh took the game away from the tourists by capitalising on loose bowling from Craig and Southee to edge Australia towards their victory target, leaving them 113-3 at the end of the second session of the day.