Smith was in grave danger of his reign being ended at Royal Liverpool on Friday night when, at four-over-par with the cut line at three-over, he delivered a truly magnificent 6-iron approach from 232 yards to within 16 inches of the pin at the par-5 final hole, ensuring a tap-in eagle.

It keeps him in the action for the weekend and, while the champion accepts it's now a "big ask" for him to retain his crown, he hasn't yet conceded his title.

But, in truth, Aussie hopes now rest firmly with former PGA Championship winner Day and rising star Lee, who are hunting down runaway leader, Brian Harman, in a tie for fourth place, seven shots adrift of the American.

Left-hander Harman, who fired a brilliant 65, is 10-under – five clear of local hero Tommy Fleetwood, with Austrian Sepp Straka another shot further back.

But Day and Lee are well placed, alongside India's Shubhankar Sharma, to cash in should the American slip over the weekend with heavy rain forecast.

Day shot 67 and Lee a 68, with Smith conceding they now carry Australia's main hopes.

Lee made his move up the leaderboard early on Friday after two bogeys early. PHOTO: Jared C. Tilton/Getty Images.

"They're obviously both playing really good golf," said Smith. "The weather isn't going to be pretty, so I think it's going to be a bit of a grinding weekend. Those two are the best at it."

But he was proud of his own final do-or-die approach to 18 after a difficult day.

"I was aware I had to make birdie to make the cut," said Smith, who ended with a 72.

"I'd have been very mad if I hadn't qualified. Especially the way I've played, I don't think my scorecard reflected the way I'd played."

Day's round featured six birdies and he wasn't sure if the title was now Harman's to lose or his to win.

"I was going to say both, but there's a lot of good players there right now playing some good golf," said Day, who's enjoying his best Open since he finished fourth in 2015.

"I've got a number in my head that I need to win with but I'm not going to say it because, typically, when I say it, I'm terribly wrong," said Day.

Earlier, on a day when his journeyman compatriot Travis Smyth made the first hole-in-one of the tournament on the already-infamous No.17 hole, it was Lee who dazzled.

He overcame early back-to-back bogeys to shoot a flawless five-under for the last 14 holes, recording a spectacular eagle of his own on the 5th with a 3-wood from 277 yards to five foot.

"Very pleased," declared Lee, who'll be cheered on by his major-winning elder sister, Minjee Lee, at Hoylake over the weekend.

"Pity on the last I didn't make a birdie, but it's been a really good day, really happy with the way things went."

Adam Scott just made it to the weekend on cut line of three-over, recording a 73, but Lucas Herbert, momentarily joint leader early in the first round, was sunk by two double bogeys as he shot a five-over 76 to miss the cut.

Australia's Open new boys – David Micheluzzi (75 to finish 10-over), amateur Harrison Crowe (80 for 14-over), Connor McKinney (77 for 11-over), Haydn Barron (77 for nine-over) and Smyth (72 for eight-over) also failed to make the weekend.