Sydney, Jan 5 (AFP) Spinner Nathan Lyon grabbed two key wickets as New Zealand faltered after a promising start in the third Sydney Test here on Sunday.

Lyon removed Melbourne Test centurion Tom Blundell and recalled Jeet Raval after a solid start to the Blackcaps innings.

The Kiwis went to lunch at 141 for three on the third day in reply to Australia's 454 with experienced Ross Taylor on 21 and newcomer Glenn Phillips not out three.

Lyon could have had another wicket but dropped a straightforward caught and bowled chance to give Phillips a life on two, and cut his right thumb in the process forcing him to require treatment before continuing.

"A bit disappointed at having dropped a simple catch," Lyon said as he left the field at lunch.

"There's not a lot on that wicket, need to keep putting the pressure on the batsmen, should be an interesting session coming up." Raval, who was dropped after twin batting failures as an opener in the first Perth Test, batted positively at number three.

But his innings came to an end when he was beaten by Lyon and was trapped leg before wicket for 31 off 58 balls.

Latham was out two balls later in the next over from Pat Cummins, done by a fuller delivery off the slower surface and chipping straight to Mitchell Starc at mid-on.

The new skipper, deputising for the unavailable Kane Williamson, was denied a deserved half-century on 49 in his 133-ball vigil and reduced the Blackcaps to 117 for three.

Blundell fell in the day's fifth over bowled by Lyon for 34.

Blundell attempted to play off the back foot only to miss it and the ball came off the inside of the left leg and on to the stumps.

It was a crucial wicket for the Australians, who were frustrated by the openers Latham and Blundell batting through Saturday's entire final session. Blundell faced 105 balls.

The Sydney Test is being played against the backdrop of one of Australia's most devastating bushfire seasons with at least 24 people losing their lives in blazes raging across the country, including on the outskirts of Sydney.

Play will be suspended in the match at the umpire's discretion, should smoke significantly affect air quality or visibility, but the sky above the ground has remained largely clear so far. AFP

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