Australia wasted a chance to blast Sri Lanka out of the game and now has a fight on its hands to win the second cricket Test after a resilient fightback from the tourists on the second day in Cairns.

Sri Lanka went to stumps on 2-184, a deficit of 333 after bowling out Australia for 517, a score the home side was lucky to get, according to vice-captain Adam Gilchrist.

"It would have been a lot worse if Pigeon and I didn't put on 30," Gilchrist said referring to his 10th wicket stand of 32 with Glenn McGrath, who contributed exactly zero.

After resuming at 2-370, Australia was humbled by legspinner Upul Chandana, who took 5-37 on Saturday as Australia lost 7-63 after cruising to 3-454.

"It is a bit disappointing as we had the opportunity to close Sri Lanka out the game," Gilchrist said of the batting collapse.

"All credit to them for clawing their way back into the game and we're going to have to work very hard to win this Test.

"We had the chance to knock them right out and we didn't take that chance."

Gilchrist wouldn't be drawn on whether Australia played too many loose shots.

"They certainly bowled a better line and length today and pitched the ball up a bit more," he said.

The one advantage Australia has, apart from a healthy lead, is the Shane Warne factor.

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