Five out of six New Zealand universities have dropped further down the rankings in a global survey - but Otago University has bucked the trend by climbing five places.
The QS World University Rankings ranks 700 global universities against each other after interviewing 33,000 global academics and 16,000 graduate employees.
The University of Auckland is the only New Zealand institution in the top 100, and dropped 14 spaces to 82 this year.
The University of Otago is the only one to gain, moving up five places to 130.
Victoria University in Wellington and Canterbury University dropped more than 10 points each, and sit outside the top 200.
QS vice president John Molony said the New Zealand universities had performed well since the ranking list began in 2004 but appeared to be losing ground this year.
"Even if New Zealand universities are maintaining their investment and performance or improving slightly this does not appear to be enough to keep up with the global pack in the current environment.''
The rankings are based on four quantitative areas; research, teaching, employability and internationalisation.
The research ranking, measured in terms of citations per faculty, dropped across all six universities, and the universities are not doing well in the teacher-student ratio or the international student ratio said Mr Molony.
Tertiary education union national president Sandra Grey said one of the reasons behind the slide was the trend of more students to every teacher after a tightening of university budgets.
"In New Zealand over the last few years, as the squeeze has gone on in terms of financing and the money that's going to these institutions, we're seeing staff more and more pressured and unable to give a good balance to the work that they're doing.''
Canterbury University has been reported to be losing 350 staff over the next three years.
The declining figures could be a sign that the New Zealand system isn't working and needs to be evaluated, she said.
"But if we're seeing this type of backward movement, we might have to question whether really whether we've got our focus right. Whether New Zealand really is focusing on what will make us world-class institutions.''
She said that in the United States there was more public and private money given to universities to make sure they were well-resourced.
Tertiary Education minister Steven Joyce said this was one of many ratings systems around the world, and they often worked against each other.
He said he thought the Government and the nation had the right approach with the current university system.
"It is a very competitive world out there and it's something that the universities are very aware of and we're aware of as well. But I think certainly if you look at the funding increases we've been able to provide despite being in the grip of a financial crisis...we're doing pretty well.''
He said university funding from tuition had gone up from $942 million in 2008 to $1.9 billion in 2011.
The University of Cambridge in Britain tops the list, followed by United States institutions Harvard University and Massachusetts Institute of Technology (MIT).
The Australian National University is the top-ranked institution across the ditch, coming in at 26, and is one of five Aussie education providers in the top 50.
Top 5 universities:
1 - University of Cambridge, United Kingdom
2 - Harvard University, United States
3 - Massachusetts Institute of Technology (MIT), United States
4 - Yale University, United States
5 - University of Oxford, United Kingdom
New Zealand rankings:
The University of Auckland: 82, in 2010: 68
The University of Otago: 130, in 2010: 135
University of Canterbury: 212, in 2010: 189
Victoria University of Wellington: 237, in 2010: 225
