Australia's Under-19 Cricket World Cup campaign is hanging by a thread after a comprehensive four-wicket loss to Sri Lanka in their second group match.

A Campbell Kellaway half-century was not enough to lift Australia to a big score, dismissed for just 175 in St Kitts.

The three-time champions got back in the game when they reduced Sri Lanka to 4-49 in reply, but they could not mount any more pressure as their meagre total was chased down with 13 overs to spare.

Moved to the top of the order for the Sri Lanka clash, Kellaway hit five boundaries and a six in his 54 from 77 balls but was the only Australian to pass 25.

Tom Whitney and Joshua Garner both claimed two wickets each with the ball -- with Whitney following on from his three wickets in the opening win over West Indies.

Sri Lanka's left-arm finger spinner Dunith Wellalage was the main destroyer, running through Australia's middle order with 5-28 -- before his 52 at No.5 helped steady his side's innings.

"It was just a little bit of a frustrating day," Kellaway told AAP.

"A few crucial moments didn't go our way throughout the day. We kept toiling right until the very end.

"We were just probably one or two wickets away from making a real tight contest."

The result left Australia third in their group with one win and one loss, with a significantly inferior net run-rate than both Sri Lanka and West Indies.

However, they still remain a chance of progressing to the quarter-finals if they beat the lowly-ranked Scotland on Thursday morning (AEDT).

Tournament hosts West Indies are also on one win, and Australia would need Sri Lanka to beat them on Saturday (AEDT) to keep any real hope of qualifying.

If West Indies were to win, Australia would need a significant turnaround in net run-rates to progress.

"Getting the win is the first thing to worry about," Kellaway said.

"We can only control what we can control at the end of the day."

U-19 WORLD CUP GROUP D STANDINGS

Sri Lanka: 4 points, NRR 1.010

West Indies: 2 points, NRR 1.009

Australia: 2 points, NRR -0.339

Scotland: 0 points, NRR -1.777