New Zealand captain Daniel Vettori marked his 100th Test match with four wickets and a run out as Australia were dismissed for just 231 on the opening day in Hamilton.
Playing on his home ground, Vettori made his mark in the morning by running out opposite number Ricky Ponting, then removed Simon Katich (88) in more familiar fashion just before tea.
He and Tim Southee, who also took four wickets, ripped through the Australia lower order in the evening session, before the Black Caps, who trail the two-match series 1-0, reached 19 for one at stumps.
Australia looked out of sorts for much of the day and effectively handed New Zealand the initiative through giving away soft dismissals.
After Ponting won the toss and sent his side in to bat, Shane Watson had a lapse in judgement and lost his wicket for 12 when he was caught by Brent Arnel trying to hit Southee out of the park.
The celebrations were minimal in the New Zealand camp as Ponting made his way out to the crease and started to score runs freely with Katich supporting him well down the other end.
The inspirational skipper did not last long though, as he prodded a Jeetan Patel delivery to mid-off, where Vettori swooped and threw down the stumps to leave Australia a little shell-shocked on 63 for two.
Katich and Mike Hussey, both playing in their 50th Tests, settled things down and moved into the lunch break with Australia looking a little more comfortable on 84 for two.
Southee managed a vital breakthrough for New Zealand when he ended Hussey's innings on 22 as he edged a catch through to wicketkeeper Brendon McCullum.
Michael Clarke started slowly but kept the runs coming until he attempted to launch Patel over the ropes and was caught by Southee on 28, leaving Australia struggling on 172 for four.
Katich was looking comfortable and everything was pointing to a key Test century until he hit an innocent-looking Vettori delivery into the hands of BJ Watling close in to end his innings on 88.
Southee's good day continued when he caught Brad Haddin for 12 off his own bowling, before Vettori removed Mitchell Johnson for a duck.
And Southee was on a hat-trick when he trapped Marcus North plum lbw with the first ball of his next over.
That did not materialise, but Vettori soon accounted for Ryan Harris and Doug Bollinger as the tourists were dismissed for just 232.
Vettori finished with figures of four for 36 from his 19.3 overs, while Southee claimed four for 61 in 19.
That was not the last of the wickets either, with Tim McIntosh shouldering arms and losing his off stump to Bollinger in the first over of New Zealand's reply.