Perth, Dec 15 (AFP) Australia were closing in on victory Sunday against New Zealand on the fourth day of the first Test at Perth Stadium.

The Kiwis were set a mammoth 468 to win -- which would be a record chase in Test cricket -- on a deteriorating pitch after Australia declared at 217 for nine in their second innings.

The visitors struggled to 98 for five at tea, still needing another 370 runs with just five wickets in hand and their best two batsmen already back in the pavilion.

Henry Nicholls (21) fell to the last ball before tea, caught off the back of his bat at short leg by Travis Head off the bowling of spinner Nathan Lyon (3-33).

BJ Watling was on 20, having joined Nicholls at the wicket after Ross Taylor (22) and Tom Latham both fell with the score on 67.

Taylor tried to pull a Mitchell Starc (2-32) delivery and got a bottom edge through to wicketkeeper Tim Paine to give the left-arm quick his seventh wicket of the match.

Latham showed plenty of application to face 68 balls for his 18, but was given out leg before wicket to Lyon after an Australian DRS review, with umpire Aleem Dar initially giving him not out.

Star batsman and captain Kane Williamson made just 14, before falling to Lyon's first ball of the innings.

Williamson got off to a fast start with boundaries from the first two balls he faced, but was caught at short leg fending a ball that bounced and turned sharply off his glove into the hands of Matthew Wade.

The rot started early for the Kiwis, with opener Jeet Raval making just one before being caught in gully from the bowling of Starc.

Australia's second innings fell away dramatically after being 131 for one at one stage on the third day.

The home team lost seven wickets for 58 runs, as they struggled against a sustained barrage of short-pitched bowling on another hot Perth day.

Tim Southee again impressed with 5-69, after also picking up four wickets in the first innings. AFP

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