The German made her breakthrough in 2016, with wins at the Australian Open and Flushing Meadows, but struggled a year ago, falling to 22nd in the world.
The 2016 Australian Open champion and former No. 1-ranked Kerber won four singles matches at the Hopman Cup, helping Germany to reach the final against Switzerland, and followed up with five wins in Sydney.
Gavrilova was playing her third successive Australian opponent in Sydney.
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Medvedev is eyeing off his first career title after toppling veteran Italian Paulo Lorenzi 6-3, 6-3.
In the men's final, Russian qualifier Daniil Medvedev beat 18-year-old Australian Alex de Minaur 1-6, 6-4, 7-5. I played some of my best tennis this week and it wasn't enough.
Bidding to become the first Australian woman to win in Sydney since Alicia Molik in 2005 player, Barty beat Kerber the last time they met but ominously the German is yet to lose in 2018.
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Barty was gracious in defeat, adding: "It's unbelievable to see Angie back playing at her best".
The second-seeded Mertens, who won her maiden singles title in Hobart a year ago as a qualifier, became the first player to win the tournament twice.
However, she impressed in Sydney, beating the likes of Lucie Safarova, Venus Williams, Dominika Cibulkova and Camila Giorgi before edging out home favourite Barty 6-4 6-4 in the final. The German would ultimately take their match in three sets, cruising through the final two sets against the American.
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