Click here to read Oxfam's report on the global food situation
Australia was the only non-European country in the top 12.
New Zealand also fell behind the United Kingdom (13), Japan (21) and the United States (21).
The report compared data on whether people had enough to eat, affordability and quality of food, and the incidence of obesity and diabetes.
The cost of food and unhealthy eating habits pushed New Zealand down the list. Ranked on obesity, only 13 countries out of 125 scored worse.
While the Pacific Islands had the worst levels of obesity, they were not included in the index because of a lack of data on other criteria.
Linda Outhwaite, president of the Clinical Nutrition Association, said lowering taxes on food would help people afford healthy options.
"The European countries that rank higher do have a higher standard of living and a lower tax rate on food, and that is something that I think we should be considering here," she said.
"Years ago we had sales tax and duty at many different rates on a huge range of products and businesses coped, so surely they could cope with a reduction in GST on fruit and vegetables.
"There is still the perception that a meal of fish and chips is cheaper than a home-cooked meal containing vegetables, and that is something we need to change, as it is often not true."
Oxfam New Zealand spokesman Jason Garman said the study aimed to shine a light on the global food system and show it was broken for wealthy countries as well as poor.
That was highlighted when even a developed country such as New Zealand had serious diabetes and obesity problems, he said.
As well as people making better choices, the Government could follow others in putting restrictions on trans-fat in foods, he said.
Oxfam International executive director Winnie Byanyima said the index revealed how the world was failing to ensure that everyone was able to eat healthily.
Food in Guinea, Gambia, Chad and Iran costs people 2 times more than other consumer goods, making those the most expensive countries for citizens to buy food.
Table of the world's diet
The Good Enough to Eat index asked:
* Do people have enough to eat? Measured by levels of undernourishment and underweight children.
* Can people afford to eat? Measured by food price levels compared with other goods and services and food price volatility.
* Is food of good quality? Measured by diversity of diet and access to clean and safe water.
* Unhealthy outcomes of people's diet. Measured by diabetes and obesity.
Healthiest countries
1: The Netherlands.
2nd equal: France, Switzerland.
4th equal: Denmark, Sweden, Austria, Belgium.
8th equal: Ireland, Australia, Luxembourg, Portugal, Italy.
13th equal: Spain, Greece, Germany, United Kingdom, Norway, Finland, Cyprus, Iceland.
21st equal: United States, Japan.
23rd equal: New Zealand, Israel.
Unhealthiest countries
125: Chad.
123rd equal: Angola, Ethiopia.
122: Madagascar.
121: Yemen.
119th equal: Niger, Burundi.
118: Mozambique.
117: Zimbabwe.
116: Sierra Leone.
