A pedal malfunction in Andreas Mikkelsen's Volkswagen has blown the season-ending round of the World Rally Championship in Australia wide open.

Mikkelsen's clutch was damaged towards the end of the 16th stage, leaving it nudged against his brake and forcing him to lose 9.8 seconds on his world champion Volkswagen teammate Sebastien Ogier.

His lead has now been reduced to 2.8 seconds, the smallest margin since Friday's third stage.

New Zealand's Hayden Paddon is 7.3 seconds behind, despite losing second place to Ogier when he dropped the exact same margin to the world champion in a horror second-run at Nambucca.


Paddon was 10.2 seconds quicker than the rest of the serious race contenders when he won the first stage through Nambucca in the morning, despite dust inundating the car.

"Must be damage underneath the car somewhere - it felt as if the rear door was open," he said.

"It started right from the start.

"And at the last point in the trees it was just hard to focus on the braking points."

Paddon and Mikkelsen can still take second in the championship off Hyundai's Thierry Neuville if they win in Australia and results fall in their favour.

Neuville needs to only finish on the podium on Sunday to wrap up the runners-up spot in the drivers' championship, but too struggled with visibility in the lingering dust.

He was quickest through the 16th stage to be 32.6 seconds off the pace, but crucially 22.5 seconds from the third step of the podium.

Mikkelsen's issues have brought the rest of the chasing pack back into the race.

"I'm driving with brakes on all the time," Mikkelsen said.

He'll now work to fix the problem ahead of Saturday night's two brief beachside stages.

However it prove to be a killer blow, with Mikkelsen is likely to have to lead the cars off in Sunday's five final stages given his top place in the standings.

Such a position is a significant disadvantage on the gravel sections of the Australia rally, where the Norwegian will sweep away the loose surface.

Engineers estimate it costs the lead car as much as 0.2 seconds per kilometre for each car that follows at times.

Meanwhile Volkswagen's Jari-Matti Latvala brushed aside Friday's dramas to win the 13th and 15th stages.

However he remains more than seven minutes off the pace after he hit a bridge and broke his suspension on Friday.