Fardy has played on the blindside flank in all six Tests since Ewen McKenzie took over as coach but sustained the injury in last weekend's 54-17 Rugby Championship victory over Argentina in Rosario.
In Scott Higginbotham's continued absence through injury, Dave Dennis or Ben McCalman are likely to start in Fardy's place against the All Blacks in Dunedin on October 19, where Australia will be playing for pride after losing the first two Tests.
Fardy's physicality will be missed against the world champions but the 29-year-old was included in the 32-man party for the trip to Europe, where Australia will play England, Wales, Scotland, Ireland and Italy.
McKenzie was able to add a bit of muscle to his squad with the recall of hooker Tatafu Polota-Nau, who has missed the entire international season this year with a broken arm and more recently a hamstring injury.
Rangy winger Nick Cummins has also returned from a hand injury but neither he nor Polota-Nau will be available for the Test against New Zealand.
Uncapped winger Peter Betham and versatile front rower Albert Anae have been dropped with flanker Liam Gill, third string scrumhalf Nick Phipps, tighthead prop Paddy Ryan and goal-kicking centre Mike Harris returning to the group.
"We recognise we are going over to play some very experienced and talented teams in the UK following our Test against the All Blacks," McKenzie said.
"As a result, we've selected a group that contains a strong mix of veterans but also 10 players, almost a third of the squad, who have only made their Test debuts this season.
McKenzie composed his squad without a string of long-term casualties, including full-back Kurtley Beale, flanker Higginbotham, number eight Wycliff Palu and flanker David Pocock.
Winger James O'Connor was ruled out after being released from his Wallabies contract in the wake of a string of disciplinary problems.
Forwards: Ben Alexander, Sekope Kepu, Benn Robinson, Paddy Ryan, James Slipper, Saia Faingaa, Stephen Moore, Tatafu Polota-Nau, Kane Douglas, James Horwill (captain), Rob Simmons, Sitaleki Timani, Dave Dennis, Scott Fardy, Liam Gill, Michael Hooper, Ben McCalman, Ben Mowen.
Backs: Will Genia, Nick Phipps, Nic White, Quade Cooper, Matt Toomua, Adam Ashley-Cooper, Mike Harris, Tevita Kuridrani, Christian Lealiifano, Nick Cummins, Chris Feauai-Sautia, Joe Tomane, Israel Folau, Bernard Foley
- Sports & Recreation
- Dave Dennis
- Ewen McKenzie
- Scott Fardy
- Ben McCalman