Circumstances VH-TJR [Boeing 737] had departed Melbourne for Canberra at 1529 hours and was on a 10NM final for runway 35 at Canberra airport. The crew had been cleared to make the approach by Air Traffic Control [ATC]. VH-TCO [Cessna 150] was performing circuit training with a student pilot at the controls being supervised by an instructor. The aircraft was instructed by ATC to make a right orbit when on downwind leg and as the trainee was completing the manoeuvre ATC instructed the crew to sight and follow a B737 on an 8NM final. They looked to their left and saw a twin engined jet passenger aircraft that looked like a B737 and acknowledged the ATC instruction as they turned their aircraft onto base leg. The aircraft they saw was an Airbus Industries A320 which was carrying out an approach to runway 35 ahead of VH-TJR. As VH-TCO was proceeding on its base leg the instructor realised that the aircraft they saw was not at the 8NM final position that was indicated by the Aerodrome Controller [ADC]. He then looked to his right and saw a second twin engined jet passenger aircraft, VH-TJR and calculated that his present track and altitude would take his aircraft above and behind that aircraft. At this point the ADC again issued traffic information to VH-TCO as he observed the two aircraft closing on one another. As the relative tracks of the two aircraft closed the captain of VH-TJR looked to his left and saw VH-TCO in a position that appeared to be on a collision course and immediately took evasive action by turning his aircraft to the right. After diverging about 0.5NM, the aircraft then re-joined final approach and made an uneventful landing. The crew in VH-TCO did not take evasive action, as the instructor watched the B737 pass clear, in front and below his aircraft. He had maintained visual contact with VH-TJR continuously from the time he had first seen it. The aircraft came within 300 metres and 300ft of each other. Significant Factors 1. The crew of VH-TCO initially sighted the wrong aircraft and selected a flight path based on this incorrect sighting. 2. The crew of VH-TCO realised their error while on base leg and elected to continue with that track having correctly sighted the B737. 3. Separation between the aircraft reduced to the point where the crew of VH-TJR considered that evasive action was necessary to maintain adequate clearance from VH-TCO.