However, Melbourne outperformed 140 rivals to receive the Global Liveability Survey gong for a second year in a row with a near perfect score of 97.5 per cent.
It only lost points for climate, culture and petty crime.
Sydney
dropped one place to seventh position despite an unchanged score, while
Adelaide rocketed three places to joint fifth thanks to infrastructure
improvements.
Perth was ninth, down one place.
Economist Intelligence Unit survey editor Jon Copestake said just 1.6 percentage points separated the five Aussie cities surveyed.
''Australian cities continue to thrive in terms of liveability not only do they benefit from the natural advantages of low population density, but they have continued to improve with some high profile infrastructure investments,'' Mr Copestake said from London.
''In Adelaide, projects completed in recent years under the Strategic Infrastructure Plan for South Australia have been enough to move the city above Sydney, whose score is unchanged.
''Melbourne may claim national bragging rights (in topping the rankings), but four of the five Australian cities surveyed are in the top 10 of the global index, and are separated by just 1.6 percentage points."
Elsewhere in the world the impact of the Arab Spring, and the fallout from the Euro zone crisis, are still being felt.
Many cities in the Middle East and North Africa have seen downward revisions of their scores due to civil unrest.
The ongoing civil war in Syria saw the capital, Damascus, fall furthest as violence intensified, dropping 13 places to 130th and into the very bottom tier of liveability with a score of 46.3 per cent.
London, which recently hosted the Olympic Games, saw a drop in score as a result of riots that took place in the
UK last year, causing it to fall two places to 55th in the ranking.
Dhaka in Bangladesh has the unenviable title of being the least liveable location surveyed.
The global liveability report surveys 140 locations around the world to assess the best or the worst living conditions.
It originated as a means of testing whether human resource departments needed to assign a hardship allowance as part of expatriate relocation packages.
It has since evolved as a broad benchmarking tool used by city councils, organisations or corporate entities looking to test locations against one another.
Cities are scored on political and social stability, crime rates and access to quality health care.
It also measures the diversity and standard of cultural events and the natural environment; education (school and university); and the standard of infrastructure, including public transport.
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