The world No 1 was 5-1 down in the second set against fearless Collins but came storming back to win on a tiebreak and sweep past the 27th seed 6-3, 7-6 (7/2) and be crowned Australian Open champion.
It was a third Slam title for the 25-year-old after her breakthrough French Open success in 2019 and Wimbledon last year, joining Serena Williams as the only active player to win majors on all three surfaces.
"It's a dream come true for me and I'm just so proud to be an Aussie," said Barty.
"It's incredible, time and time again we've come so close and now to have my hands on such a beautiful trophy after an exceptional fortnight is just unbelievable.
"But for me, it's about the memories more than the trophies, it's the memories we make from the whole journey," she added.
"We (her team) often talk about it being this incredible journey, this great adventure. It's about making those things happen along the way and really enjoying it."
Barty achieved the feat with Christine O'Neil, the last Australian man or woman to win an Australian Open single, watching in the stadium.
O'Neil won the title in 1978 and told reporters before the match: "I'm probably her (Barty's) biggest fan. I'd be happy to hand it over to her because she's so deserving of it."
There were fears Barty might be overwhelmed by the weight of expectation, but the Australian has dealt with intense pressure before, none more so than at Wimbledon last year.
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