The index ranks 140 countries on factors such as military expenditure and respect for human rights.

New Zealand ranked behind Iceland, Denmark and Norway. The United States was 97th, one place lower than last year when the survey began.

"It is clear that small, stable and democratic countries are the most peaceful," the report said, noting that island nations also "generally fare well".

New Zealand's position was described as "lofty".

The report said New Zealand lacked internal conflict and had generally good relations with neighbouring countries. The report did not mention the raids on alleged weapons training camps in the Bay of Plenty last year.

"Measures of safety and security such as the level of violent crime, the likelihood of violent demonstrations and the number of homicides receive very low scores, unchanged from last year."

However, violent crime in New Zealand and the number of jailed population per 100,000 is higher than in the five Nordic nations surveyed.

New Zealand's military expenditure as a percentage of GDP is low, and notably lower than Australia's, the report said.

The United Kingdom ranked 49th, just below Panama. Unsurprisingly, Sudan, Somalia and Iraq are at the bottom of the list.

The idea for the index came from Steve Killelea, an Australian businessman and philanthropist who wanted to identify just what creates a peaceful country.

"The US does so badly because has the highest proportion of jailed people in the world. And it has high levels of homicide and high potential for terrorist attacks," Killelea told The Associated Press. "Its overall score is a reflection of that. The index is not making any moral statements by the ranking."

US State Department spokesman Sean McCormack said the America's ranking reflects its role as a protector of democracy.

The Top 10 most peaceful countries:

1. Iceland

2. Denmark

3. Norway

4. New Zealand

5. Japan

6. Ireland

7. Portugal

8. Finland

9. Luxembourg

10. Austria

- NZPA