New Zealand is the seventh most prosperous nation in the world, but there's one area where it's falling behind, a global prosperity index shows.

New Zealand's ranking in the Legatum Prosperity Index is the lowest it has been in 13 years, however, that was a result of the index undergoing methodological change and featuring new indicators this year, a spokesman said.

In 2018 New Zealand was ranked second only to Norway, but under the new methodology and indicators, New Zealand's 2018 ranking has been retrospectively adjusted to seventh, meaning its prosperity ranking is unchanged in 2019.

STUFF Christopher Chandler is the founder of the Legatum Institute, which puts out a Prosperity Index each year.

Countries that sit ahead of New Zealand in 2019 include number one ranked Denmark followed by Switzerland, Sweden, Finland and the Netherlands.

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The index is an initiative by Legatum, a global private investment company, founded by New Zealand-born Christopher Chandler, with links to pro-Brexit politicians and campaigners.

In analysing the performance of the 167 countries more than 100 "experts" looked at "12 pillars", comprising 65 different elements, measured by 294 indicators, using publicly available data.

Those pillars are safety and security, personal freedom, governance, social capital, investment environment, enterprise conditions, market access and infrastructure, economic quality, living conditions, health, education and the natural environment.

New Zealand performed best in investment environment, where it ranked third. Investment environment measures the extent to which investments are protected through the existence of property rights, investor protections and contract enforcement, and also the extent to which domestic and international capital is available for investment.

New Zealand's lowest ranking was for living conditions (26th). Living conditions measures what's necessary for individuals to attain a basic level of wellbeing including a level of material resources, adequate nutrition and access to basic services and shelter.

Overall New Zealand ranked ahead of Germany, (eighth) the United Kingdom (11th), Canada, (14th) Australia (17th), the United States (18th) and China (57th), which climbed eight places since 2009, driven by improvements in its enterprise conditions and in the living conditions of its residents.

123RF New Zealand is ranked as the third best country for investment environment.

Changes to the Legatum Prosperity Index included introducing more policy-focussed elements and increasing the number of pillars from nine to 12.

Legatum Institute chief executive Philippa Stroud said prosperity continued to rise in the world, both over the last year and since 2007 with 89 per cent of countries experiencing higher levels of prosperity than they did a decade ago.

Of the 167 countries measured, 148 had become more prosperous over the last decade and every region has seen improvement over the past 10 years.

However, the gap between the highest and lowest prosperity scores was the largest since 2007, she said.

The rise in global prosperity over the past decade had been driven by more open economies. But improvements in global prosperity were being held back by weaker personal freedom, and declining governance, she said.

CHRISTEL YARDLEY/STUFF New Zealand performed worst in the "living conditions" pillar, which measures such things as access to shelter.

Economies were more open due to the improvement in the investment environment and digital connectivity (internet usage has also more than doubled in the past decade), as well as a reduction in administrative burdens, she said.

Following an extended period of deterioration the "safety and security" pillar had improved across the world.

"Safety and security, in all its guises, is the foundation of any successful nation building," Stroud said.

Safety and Security enabled other pillars of prosperity to follow, she said.

The least prosperous nation was South Sudan, behind Yemen and Central African Republic.

The bottom 30 countries in the index faced significant challenges across all pillars, especially in improving safety and security, she said.

The middle 90 countries of the index, those that ranked 40th to 130th and which contained 69 per cent of the world's population, was where massive opportunity for developing prosperity existed, Stroud said.

New Zealand's 12 pillar rankings:

Safety and security: 13th

Personal freedom: 10th

Governance: fifth

Social capital: seventh

Investment environment: third

Enterprise conditions: 14th

Market access and infrastructure: 21st

Economic quality: 19th

Living conditions: 26th

Health: 22nd

Education: 10th

The natural environment: sixth