Lee's pace was enough to cause Sri Lanka's innings to unravel

Brett Lee cut a swathe through Sri Lanka's batting as the tourists were all out for 246 in reply to Australia's 542 in the second Test in Hobart.

Skipper Mahela Jayawardene hit his first Test century against Australia but his effort was feebly supported.

Australia then chose not to enforce the follow-on, and moved to 111-1 at stumps on day three, for a lead of 407.

Lee took 4-82 before Phil Jaques continued his excellent form in the series to be unbeaten on 53.

Sri Lanka began Sunday's play on 30-0, but the tone was set when Lee removed Michael Vandort's middle stump after just 11 runs had been added.

The other opener, Marvan Atapattu, soon followed when attempting an ambitious shot and edging Lee to Michael Clarke in the gully.

Jayawardene and Kumar Sangakkara put on 53 for the third wicket, but needed much more than that.

606: DEBATE Give your reaction to day three of the Hobart Test

Their partnership came to an end when Sangakkara, on 57, flayed Mitchell Johnson through the off-side, only to be caught by Michael Hussey at backward point.

The innings unravelled quickly as first Stuart MacGill got in on the act by defeating Sanath Jayasuriya's sweep and then having Chamara Silva caught behind.

Prasanna Jayawardene fell for a duck before the injured Farveez Maharoof, batting with a runner, was run out following a terrible mix-up.

That exposed the tail, and the captain was forced to go for his shots. He was last man out for 104.

Jayawardene's ton was a crumb of consolation for Sri Lanka

He had played MacGill particularly well, hitting most of his boundaries off the leg-spinner.

Australia batted quickly in their second innings, and lost only Matthew Hayden, lbw to Muttiah Muralitharan for 33.

It was his 704th Test wicket and left him just four wickets adrift of Shane Warne's world record.

The Sri Lankans, down to just three frontline bowlers because of Maharoof's ankle injury, posed little threat to Australia.

Afterwards, Lee was happy to explain why Ricky Ponting had elected against enforcing the follow-on.

He said: "When they were about eight wickets down Ricky said that we would have a bat.

We've been pushed to the wall now... There's nowhere else for us to go, except to push them back Mahela Jayawardene

"It's just the fact that it was back-to-back Tests and back-to-back innings as well.

"The bowlers have all pulled up brilliantly after this first innings but it's a precaution to make sure the bowlers are all looked after, go home and have a good night's sleep and come back tomorrow at some stage."

Jayawardene said: "Unfortunately, we still haven't got that hunger for victory. We need to bring that out in ourselves.

"As a team, we need to focus more. We've been pushed to the wall now.

"There's nowhere else for us to go, except to push them back."

The Aussies are on course to notch a 14th Test win on the bounce, the sequence beginning against South Africa in Melbourne in December 2005.