Serena was unseeded in Melbourne

The American had slumped to 81st after a year wrecked by injuries and loss of form but her superb run in Melbourne propelled her up the rankings.

Maria Sharapova has been confirmed as the new world number one, despite her defeat by Williams in the final.

Previous world number one Justine Henin-Hardenne missed the Australian Open because of personal reasons.

Amelie Mauresmo and Svetlana Kuznetsova could have overtaken the Belgian but they suffered fourth-round exits.

That means Sharapova, who last led the rankings in August 2005, can add to her seven weeks as the world number one.

"Losing is never fine, but at the end of the day, to be in the final of a Grand Slam in the first tournament of the year, I'm proud of it," said the Russian.

"The rankings never lie. I had a great end of the year last year and I hope I can take that into this year."

The 19-year-old hopes to put her crushing 6-1 6-2 defeat to Williams behind her when she plays the Pan Pacific Open in Tokyo this week. Sharapova is expected to face tough opposition in former world number one Martina Hingis.

Hingis dashed Sharapova's defence of the Pan Pacific Open last year with a 6-3 6-1 semi-final victory.

Sharapova and three other seeds - second seed Hingis, defending champion Elena Dementieva of Russia and Jelena Jankovic of Serbia - receive first-round byes.