The Swiss third seed, 38, was hampered by a groin injury which he picked up in Tuesday's quarter-final win over American Tennys Sandgren.

Defending champion Djokovic, 32, won 7-6 (7-1) 6-4 6-3 in Melbourne.

"It's always tough when you have a 3% chance of winning, but that's better than none," said Federer.

"It was horrible, to go through what I did.

"Nice entrance, nice send-off, and in between is one to forget, because you know you have a 3% chance to win."

Federer said that Djokovic, bidding for a record-extending eighth Australian Open title, was "the better [player], no question".

Defending champion Djokovic, seeded second, was the heavy favourite to beat his long-time rival in what was their 50th meeting - the Serb has won 27.

Questions were raised about Federer's fitness going into the match and he lacked movement throughout.

"I thought I was going to make it. I wouldn't have gone on court if I thought I had no chance to win," said Federer, who had a scan on the problem on Tuesday night.

"The time-out was just one of the things that needed to be done to prevent any further problems.

"Once I was in the match I felt I would be able to continue."

Despite the problem, Federer stunned the Rod Laver Arena with a blistering start which saw him lead 4-1 and 40-0 before Djokovic fought back.

"I was playing with nothing to lose and taking big cuts at the ball and keeping rallies to a minimum, trying to catch him off guard and mix it up," Federer said.

"I got some good connections but wasn't able to serve out. I should have found a way to do that but I wasn't able to."

That proved pivotal as Federer went on to lose the opening set, allowing Djokovic to seize control from then on.

One positive for Federer is that he does not think the problem will cause him long-term issues.

Asked if he believed he could still win Grand Slam titles, he said: "Yes, I do believe that.

"I think by having the year that I had last year, also with what I have in my game, how I'm playing, I do feel that."