The Waratahs were in the box seat to become the first Australian side to beat a New Zealand team and break an 18-game drought this year but conceded 31 second-half points in a disappointing showing.

Ironically, it had been 365 days since an Australian outfit last beat a Kiwi rival - when the Waratahs knocked off the Chiefs in Sydney.

NSW have been second-half kings this year, consistently finding their groove in the final 40 minutes of matches.

So when they led 14-13 at half-time, the Waratahs would have been banking on their previous second-half form to get them over the line in what was a potential season-defining match.

When Jake Gordon crossed in the 70th minute the Waratahs trailed by nine points and there was a glimmer of hope, however they were unable to reverse the result as the Highlanders piled on five tries to two in the last 33 minutes.

"Same story, unfortunately," said Waratahs captain Michael Hooper. "Discipline killed us against a solid team like the Highlanders who took their opportunities well. I thought their second half was fantastic.

"[We showed] an ability to score points against a good New Zealand side, so that's really positive. Just ill-discipline is the main thing to work on. We struggled to get our set-piece off the mark and that really hurt us."

It is remarkable to think the Waratahs have won four games from 12 attempts and are still mathematically in the hunt to play finals football.

There is no doubt coach Daryl Gibson and his players will be hoping Australian conference leaders the ACT Brumbies will be knocked off by the Jaguares in Argentina, lest their chances of making finals will almost certainly be banished with three regular matches remaining.

The Waratahs had not tasted success in Dunedin since 2008 from three attempts, and that drought has continued despite putting themselves in an auspicious position.

NSW were starved of possession in the opening 10 minutes and while in previous encounters they may have given up soft tries, they remained resilient against a Highlanders attacking outfit bolstered by hard-working forwards through the middle of the park.

The Highlanders' first try was awarded in controversial circumstances on the back of a Bernard Foley error.

The five-eighth tried to put a short kick through the defensive line but it came off a Highlanders player's foot, to which Richard Buckman picked up the loose ball and streaked away to score.

Foley protested, saying Buckman was offside and while television replays looked to show he was indeed in front of the man, the television match official told referee Ben O'Keeffe to stick with his original decision and award the try.

In New Zealand, when 50-50 decisions don't go your way, it can make for a painfully long night.

Instead of letting it get to them, within a flash the Waratahs found themselves in Highlanders territory and it was their go-to man Israel Folau who got them on the scoresheet with a superb five-pointer in the 19th minute.

The Highlanders then kicked a penalty but it was the Waratahs who took a lead into the main break thanks to a brilliant pass by Nick Phipps and finish from Taqele Naiyaravoro.

After a topsy-turvy year, Phipps without question put his best case forward yet to keep his Wallabies jersey with a terrific match.

His pass over the top to Naiyaravoro screamed confidence and for the 51 minutes he was on the field he was sharp and hit his targets with ease.

Things weren't all smooth sailing for NSW in the second half though.

Dean Mumm was shown a yellow card for a dangerous tackle and the Highlanders made the Waratahs pay off the very next play to hit the lead courtesy of a driving maul after 46 minutes.

From that moment on it was one-way traffic for the hosts as they exuded confidence and knew that if they played clever, positional rugby, the Waratahs would more than likely not be able to run them down.

The Waratahs had their moments of attacking flair but like they have so often this season, leaked more points than NSW teams of old.

HIGHLANDERS 44 (Richard Buckman, Liam Coltman, Tevita Li, Rob Thompson, Anton Lienert-Brown, Lima Sopoaga tries; Marty Banks 4 conversions, Banks 2 penalties) defeated NSW WARATAHS 28 (Jake Gordon 2, Israel Folau, Taqele Naiyaravoro tries, Bernard Foley 4 conversions) at Forsyth Barr Stadium, Dunedin.