A woeful middle order batting collapse followed by an uninspired effort with the ball cost the Black Caps any chance of an upset victory over defending champions Australia at the World Cup in Nagpur tonight.

After losing the toss and being sent in to bat, the New Zealanders, on a pitch that has proven itself in the past to be a batsman's paradise, made it look anything but that as they stuttered to 206 all out on an overcast Indian morning.

The total, unsurprisingly, provided the Australians will little in the way of a challenge as they chased it down with 96 balls remaining and with seven wickets in hand to retain the Chappell-Hadlee Trophy in the process.

For the embattled New Zealanders, who have now won just three of their last 16 one-day matches since being whitewashed by Bangladesh in October, the only highlights on a forgettable day in India were a gutsy 52 from lower order batsman Nathan McCullum and yet another blush-saving innings of 44 from skipper Daniel Vettori.

With the tragedy of the Christchurch earthquake at the forefront of their minds, the Black Caps could perhaps be forgiven for struggling to focus on a cricket match.

But quite how badly they fared with both the bat and ball, especially against an Australian side that isn't expected to defend its crown for a fourth straight time, was staggering.

Early in the innings, keeper Brendon McCullum showed glimpses of his ability with several brutal boundaries off loose deliveries from Aussie quick Shaun Tait.

But one rash shot too many eventually saw the Black Caps opener on his way for 16 after he was caught on the third man boundary. Martin Guptill started in contrasting fashion, taking 19 deliveries to get off the mark, but soon followed when his off stump was uprooted by a Shane Watson ball that kept agonisingly low.

The final resistance at the top of the order came in the form of Jesse Ryder, who, along with Nathan McCullum later in the innings, was the pick of the New Zealand batsmen.

Showing no signs of distraction, Ryder, sporting a Mohawk, looked composed during his knock of 25 only to then inexplicably edge one behind off Mitchell Johnson, who bowled well all day and deserved his four-wicket haul.

Ryder's dismissal left New Zealand delicately poised on 66-3 and appeared to trigger a collapse as the Black Caps proceeded to lose three wickets in quick succession - James Franklin (0), Scott Styris (0) and Ross Taylor (7) - for just seven runs.

With Jamie How and Nathan McCullum at the crease, New Zealand, who up until that moment looked unlikely to reach three figures, began the painstaking task of trying to add some respectability to their total.

How, batting at No 7 and surprisingly picked at the expense of Jacob Oram, offered little in the way of resistance and when he was trapped in front by Steve Smith for 22, the Black Caps found themselves teetering on 121-7.

To beat Australia, a score in the vicinity of 300 was always going to be the order of the day. Early on it became apparent New Zealand wasn't going to get that.

But thankfully some lower order heroics from McCullum and Vettori saved the side from total humiliation and when Tim Southee was dismissed, 206 runs - hardly a great total but a better one than had been expected midway through the innings - were on the board.

It's often said in sport that the most dangerous Australian side is one that's written off.

And for Ricky Ponting and his charges, last night's run-chase was the perfect opportunity to prove to their ever-growing cast of knockers that they are indeed up for the task at this tournament.

After 15 overs, openers Shane Watson and Brad Haddin had taken their side through to 108 and the New Zealand bowlers could do little but watch on as boundary after boundary was struck.

In one over, Canterbury quick Hamish Bennett, who had been carted all around the park, finally had something to smile about when he dismissed Haddin first for 55 before Watson chopped the ball on to his stumps for 62.

McCullum then beautifully stumped Aussie captain Ponting for 12 while standing up to Tim Southee.

It was a magnificent piece of keeping but also a case of too little too late for the New Zealanders who had no answers as Michael Clarke and Cameron White set about easily completing the run chase.

The Black Caps will now fly to Ahmedabad where they play Zimbabwe on Friday. Of concern for the selectors ahead of that match will be the fact both Scott Styris and Vettori spent time on the sideline during the second innings.