The scores are calculated by assigning every city a rating across categories including stability, healthcare, education, infrastructure and culture and environment.
The best-scoring cities tend to be medium in size, located in wealthier countries and have relatively low population density.
Eight of the top ten most liveable cities are in Australia or Canada.
Premier Denis Napthine said low crime rates, world-class healthcare and leading education institutions had all played a part in Melbourne taking out the top award for another year.
“This is a great result for Melbourne and Victoria,” Dr Napthine said.
“It’s terrific to know that we scored the perfect score in healthcare, education, infrastructure and sport, and we got terrific scores in culture and environment and in stability.”
The Economist says its ranking report, which scores lifestyle categories across 140 cities, shows average liveability across the world had fallen by 0.7% since 2009, led by a 1.3% fall in the score for stability and safety.
“While this may seem marginal it highlights that over 50 of the cities surveyed have seen declines in liveability over the last five years,” it says.
“Recent conflicts in Ukraine and the Middle East have underlined continuing fallout from a decade of destabilising events ranging from the war in Iraq to the Palestinian Intifada and the Arab Spring.”
Melbourne has rated highly on other similar indexes, including third on global trends and lifestyle magazine Monocle’s Quality of Life Survey behind Copenhagen and Tokyo.