"I thought Rafa played well from start to finish," he said. "I played well myself and it (the first) was a big set for me to win.
"I missed maybe chances in some of the sets but Rafa did well to hang in there. It was a tough match to play but it's only the beginning of the season and I feel all right."
In the first three games, Federer was simply brilliant, displaying the confidence of a man who had not dropped a set in the tournament.
But, quite unexpectedly, his momentum stalled when three shanked groundstrokes gifted Nadal a break back.
He regrouped, through, to edge a nervy tie-break.
The crucial moment in the second set came in the sixth game when Nadal broke thanks to a stunning cross-court winner off the forehand side, delivered from five yards wide of the tramlines.
The 10-time grand slam winner held for 5-2 before the match was suspended for 10 minutes for a nearby firework display to celebrate Australia Day.
And when they returned Federer's game deserted him.
Nadal broke again to take the set and then held to love. And when he raced to 0-40 on the Federer serve, the Spaniard had won 11 successive points since the resumption.
Federer, though, refused to buckle and dragged it back to deuce before making it 1-1.
"It wasn't helpful," admitted Federer on the interruption. "But even though I lost a lot of points in a row I was already down in the set. The important thing was to get back from 0-40."
The Swiss remained on the front foot by breaking only to toss the advantage away again as Nadal hit back for 4-4.
It went to another breaker which Nadal claimed despite Federer saving four set points from 6-1.
If the first three sets were good, the level moved up a notch in the fourth with the two men playing at their maximum.
Both players had their chances but Nadal made the first move at the most crucial time, breaking at 4-4 to give himself the chance to serve for the match.
Even then the drama was not over as Federer bravely attempted one last time to stay in it.
Having saved one match point as a Nadal pass missed by inches, he set up a break point for 5-5.
And he must have thought he had it when a Nadal groundstroke sat up invitingly off the top of the net. He powered a forehand deep and came in only for a desperate Nadal lob at full stretch to land on the back half of the baseline. Federer's ensuing sliced smash was wide.
He set up another break point but could only net a backhand.
It was to prove his last chance as Nadal served it out.
It was Federer's first defeat in 24 matches and he is hoping to return to winning ways quickly.
"I haven't lost in five months, it's not that bad, don't feel sorry for me," he said. "I would have loved to have come through and had a crack at winning the tournament again.
"Clearly I am disappointed but the important thing is the reaction from now, where I go from here, and have a good reaction like I did after the US Open."