Murray, five times a runner-up in Melbourne, has not played a competitive match since hobbling to defeat against American Sam Querrey in the Wimbledon quarter-finals last July.
The 30-year-old's withdrawal was confirmed by Australian Open organisers who published a statement from the Scot on the tournament's Twitter account on Thursday.
"Sadly I won't be playing in Melbourne this year, as I am not yet ready to compete," three-times grand slam champion Murray said. "I'll be flying home shortly to assess all the options but I appreciate all the messages of support and I hope to be back playing soon."
Murray played a one-set exhibition match in Abu Dhabi last week, losing to Spain's Roberto Bautista Agut.
He also played Roger Federer in a charity exhibition match in Scotland in November, but his hopes of playing in the year's first grand slam nosedived when he withdrew from this week's Brisbane warm-up event.
Olympic champion Murray has fallen to 16th in the world rankings and will now have to decide whether or not surgery is needed to overcome the hip problem.
"The chances of a successful outcome are not as I high as I would like which has made (surgery) my secondary option and my hope has been to avoid that," Murray said this week when announcing he would not play in Brisbane.
"However, this is something I may have to consider but let's hope not."
Murray underwent back surgery at the end of 2013 but returned to play some of his best tennis and won a second Wimbledon title in 2016 and reached number one in the world rankings for the first time.
That effort took its toll on Murray in 2017 as he won only one title.
He joins Kei Nishikori on the absent list for this year's Australian Open after the Japanese withdrew to continue his rehabilitation on a wrist injury.
Several other players, including world number one Rafael Nadal and six-times Melbourne Park champion Novak Djokovic are battling to be fit for the Australian Open.
"We are fully aware that Andy has been going through a difficult period with his hip and that he's done everything possible to prepare for the Australian summer," Australian Open tournament director Craig Tiley said.
"Personally, I also know that Andy loves tennis and would do anything to play. This is a very hard decision for Andy and we totally respect it."
Tiley was confident that Djokovic (elbow) and Nadal (knee) would be ready for the Jan. 15 start in Melbourne.
"I spoke to Novak. He's already got every hour of the day planned between when he arrives and the start of the Australian Open. He'll be ready," Tiley said.
"(Rafa's) on his way down here now so he'll be ready. It’s not dissimilar from last year...Last year we were talking about the health of Rafa Nadal, Roger Federer and Serena Williams and two weeks later they were playing each other in the final."
(Reporting by Martyn Herman and Hardik Vyas; editing by Amlan Chakraborty and Pritha Sarkar)
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