Waratahs coach Chris Hickey insisted his team still controlled their Super 14 rugby finals destiny despite being disappointed with their performance in a costly 26-10 loss to the lowly Highlanders in a wet Invercargill on Friday.

Starting the night in fifth position, just one point and place behind old rival Queensland, NSW couldn't produce the control or flair to threaten the 12th-placed Highlanders.

NSW now face the prospect of having to win their two remaining games away to the Chiefs and at home to the Hurricanes and hope other results go their way.

The Waratahs will enter next weekend's penultimate round outside the top four and captain Phil Waugh said it was now a do or die situation for his team.

Hickey denied the upset loss to the 12th-placed Highlanders would leave his team's finals fate hinging on the results of other matches.

"I think that if we win those last two games and probably pick up a bonus point, that will be sufficient for us to get in the four," Hickey told AAP.

"Particularly given that the top three teams are all playing each other over the next couple of weeks."

The Highlanders were more disciplined and clinical, as the fumbling Waratahs struggled to retain possession and maintain pressure.

NSW lacked the resolve and technical ability on an inhospitable night and conceded 14 unanswered points in the second half after trailing 12-10 at the break.

Waugh said NSW were "out-willed in the contest" while Hickey felt his team struggled at the breakdown, gave away too many scrum penalties and also kicked poorly.

"There was plenty of blokes trying hard, but in those conditions if you don't get the breakdown right, if your kicking game is poor and you're not going forward, it's very hard for individuals to try and create something by themselves."

No.8 Ben Mowen and hooker Tatafu Polota-Nau tried hard in the forwards, while among the backs, fullback Kurtley Beale, inside centre Berrick Barnes and wingers Drew Mitchell and Lachie Turner did well with limited opportunities.

Tries to No.8 Steven Setephano and outstanding flanker Adam Thomson set up a 12-0 lead inside 13 minutes as the expected early onslaught from the home pack eventuated.

NSW finally started to hold onto possession and five-eighth Daniel Halangahu got them on the board with a 20th minute penalty.

Mowen and Barnes then combined to set up their team's only try for Beale.

Halangahu's conversion meant NSW entered the sheds just two points behind, but they couldn't mount any sustained pressure into the wind after the break.

Thomson crossed for his second try in the 46th minute after another decisive incision by dangerous fullback Israel Dagg.

Five-eighth Mat Berquist missed the conversion but kicked three penalties as the Highlanders' superior control and discipline paid dividends.

Hickey reported no new NSW injuries and said a decision would probably be made on Sunday over whether prop Benn Robinson (forearm) and centre Rob Horne (buttock) would be fit to fly over and join the squad for next weekend's clash with the Chiefs in Hamilton.

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