The Spaniard, who has dropped to world number two due to Djokovic's recent dominance, is determined to reach the final in Melbourne following a disappointing semi-final exit to Gael Monfils in Qatar.
"I've been working hard," said Nadal. "I think I'm working the right way. There's Djokovic [to compete with], but there's a lot of fantastic players around and I have to be ready to compete against everybody.
"Last year I lost six important finals against him, but I played finals and that's something really difficult to do. I know how difficult it is to be [in finals] almost all the time."
While there have been doubts around the fitness of the 25-year-old, Nadal has insisted that his recurring shoulder injury is in "perfect condition".
The French Open title holder will take time off in February to recuperate.