The Australian drawcard is three shots shy of second-round American leader Brendan Steele at the Grange Golf Club.
Smith says he feels comfortable on course, a tad tired from all the attention, and grateful for the lady his errant shot hit on the 17th hole.
The blow rebounded kindly and Smith made a birdie - one of seven in a smooth 65 on Saturday for the Queenslander.
"I felt really bad for the old lady  ... I hit her in the back," Smith said.
"It probably wasn't going to be in the trees, but it was going to be in the rough and a different lie, so it could have been a different outcome.
"But (I) made her proud and made a birdie there, and she helped me out - hopefully that eased the pain a little bit for her.
"She was nice. I went over there and I signed a ball, and she said 'just give me a hug', so I gave her a hug as well. She was sweet."
Smith is 11 under, three shots behind American Steele, who carded a stunning eight-under 64.
Steele leads from New Zealander Danny Lee (13 under), who lamented a double-bogey in his 67 to follow his first-round 64.
Mexico's Carlos Ortiz and Mito Pereira are firmly in the frame at 12 under, followed by a batch including Smith, who said the raucous home crowd was a double-edged sword.
"It definitely makes it harder, it's not making it any easier out there," he said.
"The support is amazing, but there's a lot going through your mind every second of the day.
"It's very tiring ... a good and a bad thing at the same time."
Steele, a three-time US PGA Tour winner, shot nine birdies, with a bogey at the par-4 11th his sole blemish.
And he predicted a 20-under total after Sunday's final round would be needed to take the $6.1 million winner's cheque.
"There's good scores out there for sure," he said.
"If you're in the fairway, then you can take on a lot of the pins."
Mexico's Carlos Ortiz and Mito Pereira are firmly in the frame at 12 under, followed by a batch at 11 under including Smith, whose compatriot Matt Jones is 10 under.
Fellow Aussie Marc Leishman slipped in a horror patch of three bogeys in four holes - he finished six under after carding a 71 - while Lucas Herbert rebounded from his first-round one-over to shoot a seven-under 65.
Japan's overnight leader Jinichiro Kozuma failed to cash in on his nine-under opening round, enduring a topsy-turvy time - an eagle, three birdies and four bogeys in his 71.
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