He could have to beat his brother Mischa, six-time champion Djokovic and then 2014 victor Wawrinka if he is even to reach the last four, where a semifinal against reigning champion Federer could await.
Bookmakers are also expecting the world number two to successfully defend his title.
Argentina's Juan Martin del Potro, competing at the Australian Open for the first rime since 2014 due to a series of career-threatening wrist injuries, will compete in one of the most intriguing match-ups in the first round when he faces American prospect Frances Tiafoe.
19-time Grand Slam champion Roger Federer is placed as second seed while Bulgaria's Grigor Dimitrov and Germany's Alexander Zverev have been named third and fourth seed, respectively, the Daily Express reported.
Besides Djokovic and Federer, former champion Stan Wawrinka and Thiem were also placed in the heavy bottom half.
He returns to the Australian Open, where he lost a thrilling five-set final to long-time rival Roger Federer in 2017, after overcoming his chronic knee problems just in time and hoping to continue last year's progress under new coach Carlos Moya.
Djokovic, seeded 14th, opens against 63rd-ranked Donald Young, and could face 39th-ranked Gael Monfils - who was himself ranked sixth a year ago - in the second round.
His cause is aided by the absence of five-time losing finalist Andy Murray, who has undergone hip surgery, while Novak Djokovic is another man who has been plagued by injury as he looks to avenge last year's early exit. He delayed his return until two exhibition appearances this week. To add to this Novak Djokovic and Rafael Nadal are not fully fit, making it the Grand Slam of the walking wounded.
Serena Williams decided not to defend her Australian title, saying that just four months after having her first child that her tennis hadn't yet returned to a level where she felt could win a Grand Slam title.
She led the WTA Tour in prize money last year ahead of Wimbledon champion Garbine Muguruza and Simona Halep, who ended the year at No. 1.
Djokovic, who has dropped to number 14 in the world, will be chasing a record seventh Australian Open title if he competes in the tournament, which begins on 15 January. Former champions Serena Williams and Victoria Azarenka will miss the Melbourne Major but Petra Kvitova is back after she was forced to skip it past year following career-threatening hand injuries in a home invasion.
Maria Sharapova [16.0] will get plenty of attention, after re-entering the top 50 for the first time since her ban.
I feel great, I was eager to get onto the court, he said after playing with a flesh-coloured sleeve on his right arm.
"The drive, I still have it. For me it was not ideal to not be in Brisbane, I would have loved to be there but I had to make a different schedule this year", Nadal said during the week. "I put a lot of expectations on myself because I have been there, and I have delivered in those moments".
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