The Australian number one aggravated the abdominal strain during the ATP Cup and was also forced to pull out of this week's Adelaide International.
The 20-year-old, who reached the third round at Melbourne Park and won three ATP Tour titles last year, conceded that despite intensive treatment, he was not fit enough to compete at his home Grand Slam.
"Even getting out of bed hurts," he told reporters at Melbourne Park.
"Even though it killed me, it's the right decision."
While local Ash Barty will be top seed in the women's singles, Nick Kyrgios will now be the top ranked Australian in the men's draw at world number 26.
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Australian former world number 17 Bernard Tomic slumped out of the first round of qualifying at Melbourne Park this week complaining of breathing difficulties in the bushfire smoke.