Valentino Rossi saw seven precious points wiped from his MotoGP title lead despite a valiant comeback in a thrilling Australian Grand Prix.

Having struggled to match Yamaha team-mate and title rival Jorge Lorenzo all weekend, Rossi pulled off another Sunday surprise to break into the victory battle from seventh on the grid.

After 27 laps of constant overtaking by the lead quartet, the race reached its climax with Honda's Marc Marquez snatching a last-lap victory from Lorenzo at MG corner - while Rossi simultaneously lost third to Ducati's Andrea Iannone.

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Marquez, Lorenzo, Iannone and Rossi were covered by 1.058s at the chequered flag, cutting Rossi's title advantage to 11 points with two rounds and 50 points to go.

"It's a great shame. I'm not happy. Especially not to be on the podium because this was a great race: From beginning to end a very, very hard rhythm, a lot of overtaking, a lot of different riders. It was a real 'Phillip Island old style' race," said Rossi, speaking in the paddock on Sunday evening.

"It was a shame also to unfortunately lose seven points on Jorge, especially because my speed was very, very good today in the race and I can also arrive in front.

"So for this I'm not happy, but for the rest yes. Especially for my bike and my performance in the race. I think it is our fault - me and my team - because yesterday we did some mistakes, we lost a lot of time following different settings that didn't bring us anything.

"When you lose [time] like this in MotoGP, you arrive in qualifying not ready and for sure if I start more in front it can be a different race today. But it is our fault and we cannot cry, regret, just remember because next week we have another crucial race in Sepang.

"But from one side I'm happy because we have a good potential and in the race we were very strong."

Indeed, the only area of obvious weakness for Rossi in the race was a lack of top speed, especially relative to Iannone, who was often over 10km/h quicker.

"Unfortunately we are not strong enough in the straight," Rossi confirmed. "The Yamaha has the weak point in top speed, especially my one, because Jorge is always a little bit faster. Maybe also because he is shorter and lighter.

"So to fight with the Ducati and the Honda is difficult. We try to make the maximum also because our bike last year was faster, this year slower, and we don't understand why."

Unable to break clear of Iannone, and knowing his fellow Italian's reputation in close combat, Rossi wasn't surprised to be denied a podium for only the second time this season.

"It was a great battle at the end with Iannone. I know that he is very strong when you do this type of battle on the last lap and it is a shame he beat me, but he did a great race. There were a lot of great manoeuvres today. A lot of hard battles. It was great fun to be there, but a big shame to not arrive on the podium."

Nonetheless Rossi's main regret will surely that, having been 0.334s per lap slower than Lorenzo in qualifying, he was only 0.8s from the Spaniard after 40-minutes of flat out racing.

"If I was able to beat Jorge, today would be a completely different story and I'm not happy because I had the speed to do it," Rossi confirmed.

"Now it's 11 points and all is open. We have just to relax and concentrate on giving the maximum in Sepang [next weekend], which is always a good track, and try to especially understand our mistakes of yesterday and try to be competitive earlier."

Reflecting on the see-sawing championship fortunes, Rossi declared: "Whenever I finish a race in front of Jorge, I am the favourite. When Jorge beats me, he becomes the favourite.

"2:45pm on Sunday in Valencia is the moment we will understand who is world champion."

Asked if he will remain friends with Iannone if he loses the title by three points, Rossi didn't hesitate: "For sure, yes!"

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Good race and its a pitty Rossi could not get on podium, I understood from the beginning that Rossi was being reeled in on the straights and I think that really scuppered Rossi's chances today.

However all is not lost and who ever comes out on top in the champoinship no one will be able to say that it was given to either of them.

Rossi needs to get his qualifying sorted.