Shane Warne is back in business and so is Australia after the world champions showed the character lacking earlier in the first Test against Sri Lanka at Galle.

Led by a century to remarkable run-getter Matthew Hayden, Australia is back in contention for first Test honours after finishing the third day 2-193 in the second innings, an overall lead of 32, with Hayden on 106 and Damien Martyn ten.

The day could have gone pear-shaped for the world champions who were staring at a big first-innings deficit when they awoke to news they were without Michael Kasprowicz, who had sprained a shoulder in the field the previous day.

Then came the decision to send home Brett Lee after his ankle injury failed to recover.

Other teams could have crumbled under so much negativity.

But Warne, the eternal optimist with ball in hand, stepped into the breach and wiped out Sri Lanka's tail, taking a five-wicket haul to keep the damage to 161 runs as Sri Lanka made 381 in reply to Australia's 220.

Warne took 3-9 as Sri Lanka lost its last four wickets for 12 runs after resuming on 6-352.

"It was very important that we kept the runs down and got rid of those last four wickets to get ourselves back in the game," Warne said after play.

"And for our batters to bat like they did and to be 32 ahead with eight wickets in hand - I think we're in a pretty good position.

"Anything over 100 could be tough to get here ... If we can bat a good part of tomorrow it's going to real tough for Sri Lanka as the pitch is only going to get worse."

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