New Zealand university graduates have been rated highly desirable, despite the University of Auckland sliding down the rankings of the world's best learning institutes for the third year running.

The country's top-rated university now sits 88th in the 2020 rankings of the world's 1000 best universities, dropping three places from the 2019 rankings, according to the latest report from London-based agency Quacquarelli Symonds (QS).

Most other New Zealand universities improved their rankings on the back of academics and employers rating the Kiwi education system and its graduates higher than last year.

However, cuts to teacher numbers and a decline in the publication of influential research papers stopped Kiwi universities from jumping higher in the rankings.

Ben Sowter, director of research at QS, which compiles the annual rankings of world's top 1000 universities, said overall the latest study showed employers increasingly viewed New Zealand uni graduates as "highly desirable".

"New Zealand's universities are successfully upskilling their graduates in ways that prepare them for the uncertain, volatile, ambiguous future of work," he said.

This placed Kiwi universities in an excellent position to attract more international students at a time when the desirability of British and US universities was being increasingly questioned, Sowter said.

University of Auckland spokeswoman Lisa Finucane said the university didn't worry too much "about small year-to-year variations".

"What really matters is the long-term decline in rankings of all New Zealand's top universities which is a consequence of years of underfunding," she said. "Funding decisions by successive governments make it increasingly hard for all New Zealand universities to maintain position against highly and strategically funded universities around the world."

Other results in the QS report showed the University of Otago - the country's second highest ranked university - fell by one place compared to last year, to sit at 176.

Victoria University of Wellington was up six places to 215, the University of Canterbury jumped four places to 227 and the University of Waikato climbed eight places to 266.

Massey University was New Zealand's biggest mover, jumping 45 places to 287. Lincoln University dropped 39 places to 356 and Auckland University of Technology climbed 22 places to 442.

Massey Vice-Chancellor Professor Jan Thomas said Massey's climb was the result of "the work we all have invested over the years across many different parts of our university". "It reflects the quality of research we are producing and our research productivity," she said. "It also reflects the diversity brought by our international students and staff."

Universities NZ chief executive Chris Whelan said all eight of New Zealand's universities remained within the world's top 500 and that each one improved its academic reputation in the latest report.

Nearly all the universities also improved their reputation among the world's employers.

"New Zealand's university system remains strong," he said.

However, funding cuts were biting.

Most New Zealand universities were suffering from "a long-term real drop in funding per student" as evidenced by all but one local university now having less teaching staff for every student.

Resource issues in other areas had also led five local universities to endure a drop in how often their research papers were cited by peer reviews.

"The international education environment remains extraordinarily competitive ... with many overseas governments spending billions of dollars to get flagship universities into the list of top 100 universities," Whelan said.

"Without some real growth in funding and resources, New Zealand runs the risk of being squeezed out of having a place on that list."

The QS report used six "indicators" to compile its rankings.

They included a survey of more than 94,000 academics and 44,000 employers, measurements of how many citations universities receive for their research papers compared to how many students they have, and the numbers of teachers compared to students.

Boston's Massachusetts Institute of Technology (MIT) was ranked the world's best university, followed by Stanford University, Harvard University, the University of Oxford, and California Institute of Technology.