Cities in Australia are still falling behind those in Europe in terms of having the best quality of living for expats being posted overseas by international companies, the latest survey has found.

Only Sydney makes it into the top 10 rankings in the annual quality of living survey from Mercers, which is dominated by European cities and led by Vienna. Sydney comes in at 10 and Melbourne at 16.

But all the major Australian cities do come in the top 40 globally and in a new section for 2017 Sydney is ranked eighth for infrastructure, which is now regarded as a pivotal measure in determining the quality of living.

The report points out that although being regarded as a highly desirable and low risk country to live in, Australian cities fall dramatically behind Europe, where despite increased political and financial volatility its cities offer the world's highest quality of living and remain attractive destinations for businesses looking to establish overseas bases or send employees on international assignment.

Lorraine Jennings, Mercer's global mobility practice leader in Australia and New Zealand explained that Australian cities are regarded as being safe, having a diverse culture, skilled local workforce and robust infrastructure.

Sydney's position in eighth place for infrastructure was due to its strong showing in categories such as variety of transport, local and international connectivity and access to electricity and drinkable water, which are essential needs of expats arriving in a new location on assignment.

'There is room for Australia to improve in the rankings with factors such as Melbourne's traffic congestion and a nationwide low score on availability of international flights and international schools contributing to perhaps lower than expected results,' said Jennings.

The report also explains that by and large, cities in Oceania enjoy good quality of living, though criteria such as airport connectivity and traffic congestion are among the factors that see them ranked lower in terms of city infrastructure.

In the neighbouring Asia-Pacific region Singapore is highest ranking city at 25, with Kuala Lumpur at 86. Five Japanese cities top the ranking for East Asia with Tokyo at 47, Kobe at 50, Yokohama at 51, Osaka at 60 and Nagoya at 63.