Australia fell in a hole over the weekend at Hagley Oval, seeing their 94-run first-innings lead evaporate at the hands of the Kiwi batters, and then fumbling their chase.
The tourists were 4-77 at stumps after the Black Caps set Australia 279 to win.
Not a good position, but an improvement on the 4-34 on the scoreboard with around half an hour left to play on Sunday.
New Zealand's Ben Sears celebrates after dismissing Marnus Labuschagne for six on day three. (AP PHOTO)
"The usual roller coaster of emotions," Lyon said, downplaying Australia's troubles.
Australia have a recent blueprint for run-chase success in the memory banks: the first Ashes Test in Birmingham in June.
The pitch at Edgbaston - where Australia ran down 282 for a memorable victory - bears comparison with the Hagley Oval deck.
Nine of the XI from that memorable chase are playing in Christchurch.
"There's a lot of belief in that change room, and so there should be," Lyon said.
Defeat for Australia would elevate concerns over the tourists' aging side - a debate which will linger through the nine months until their next Tests: a five-match home series against India.
It would also mean Australia have won only one of their past five series - at home to Pakistan this summer.
Pat Cummins' side retained the Ashes and Frank Worrell trophies with drawn series against England and West Indies.
A more positive outlook would be that Australia remain hard to beat: only India have earned a series win over the Aussies across 16 series in the last five years.
Lyon was bullish on the chances of Australia bucking New Zealand's momentum on Monday and coming home strong.
Travis Head will resume on 17, alongside Mitch Marsh on 27.
Nathan Lyon remains confident Australia can save the second Test. (Ben McKay/AAP PHOTOS)
"We've still got two world-class batters in the crease," Lyon said.
"With Heady and Marshy, the way that they bat - and then you've got Alex (Carey) coming in next - anything is possible.
"We've been able to tick off a couple of totals in the past.
"There's a lot of confidence within our batting group, and us bowlers ... pride ourselves on our batting.Â
"So we'll give it our best chance if it comes down to that."
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