Melbourne has been crowned the world's most liveable city for the seventh year running.
Auckland was placed eighth, dragged down by its low score for infrastructure when compared with other cities in the top 10.
The rankings are based on five factors - stability, healthcare, culture and environment, education and infrastructure (eg. transport). Auckland got one perfect score - education. It was the only city in the top 10 not to get a perfect score for healthcare.
The top five cities in the annual report remain unchanged from a year ago - Melbourne, Vienna, Vancouver Toronto and Calgary. The remaining cities in the top 10 are Adelaide, Perth, Auckland, Helsinki and Hamburg.
"This is a win for all Victorians, who contribute so much to making Melbourne the best place to live in the world," said Victorian Premier Daniel Andrews, while Mayor Robert Doyle called it an "amazing feat".
Sydney dropped out of the top 10, falling to 11th. Lord Mayor Clover Moore blamed the city's poor transport network.
"We just can't get people in and out of the city in a timely, predictable manner."
The rising threat of terrorism in Australia's largest city was also a factor. The same reason saw Manchester and Stockholm also slide in the rankings.
A number of US cities dropped because of growing unrest over the police's use of deadly force on African-Americans, and protests against President Donald Trump.
The most-improved cities in The Economist's list are Tehran, Dubai, Abidjan, Harare and Colombo, while the biggest declines in liveability were found in Kiev, Damascus, Tripoli, Detroit and Moscow.
Syrian capital Damascus came bottom of the list, the unsurprising result of a civil war that's been raging for six years now. Other cities in which liveability is "severely restricted" include Lagos, Port Moresby, Karachi, Dhaka and Algiers.
The Economist didn't include cities such as Kabul and Baghdad however, as they are deemed unlikely to be of interest to business investments or potential migrants. Damascus and Tripoli might seem to fit that category now, but were "relatively stable just a few years ago", says The Economist, so have been included on the list.