From the start of the race, the Ferrari struggled to keep pace with the Mercedes and the Italian team's tyre strategy failed leaving Vettel vulnerable to an attack by his teammate later in the race.
Charles Leclerc was eager to make up for his poor qualifying and was closing in on Vettel but was told by the team to hold position with around 8 laps to go.
Vettel's tyre strategy had been to try and undercut the Mercedes of Lewis Hamilton but he couldn't get the performance out of the medium tyres and was frustrated by their high wear.
That left Vettel open to attack from Max Verstappen who was able to pass him and went on albeit unsuccessfully to challenge Hamilton for second place.
The German admitted that he was not too concerned by the result and believes that Ferrari is closer to Mercedes than it seemed today.
"I guess we were just slow, I didn't have much chance to fight anyone, just a case of getting to the end. Not quite sure what the issue was."
Vettel said that part of his problem was his tyres and said that it seemed that everyone else was having fewer problems than he was including his teammate.
Charles Leclerc had a poor first stint after having a shaky start. He tried to pass Verstappen but couldn't complete the move as Vettel was in front of him and ended up on the grass allowing Verstappen to claim his place.
He had a solid remainder of the race and was closing in on Vettel, only to be told by the team to hold position with 8 laps to go.
Leclerc said: "In general the car was quite difficult to drive. However, the second stint was more positive It wasn't a fantastic race but on the other hand we know that the Melbourne track is atypical."