The Dalai Lama charmed and chuckled his way into the heart of Dunedin yesterday.

The spiritual leader was officially welcomed by a delegation of about 50 people from the Dunedin Interfaith Council on the steps of St Paul's Cathedral yesterday morning.

His Holiness had a message for people of all faiths, University of Otago chaplain Rev Greg Hughson said.

"We wanted to show our respects to a man of international peace and goodwill. We honour him for his commitment to peace and the way he transcends boundaries. He models that for all of us."

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After the welcome, the Dalai Lama held a question and answer session for 550 University of Otago staff and students at the St David lecture theatre, before his lunchtime public talk at the town hall.

The venue was, appropriately, packed to the gods, with all 2100 tickets selling before the event.

"Your presence in our city brings great joy," former Dunedin mayor Dame Sukhi Turner said, in introduction.

The talk was based on the Dalai Lama's book, Beyond Religion: Ethics for a Whole World, about living a happy life in a challenging modern world.

"There is no formality, no seriousness; just talk. I treat you as a long-time friend," he said.

"Consider myself one of you. The way we were born is the same and the way we die is the same. You have positive and negative emotions. Me too. We are all seeking a happy life.

"Trust is the key aspect for friendship. With trust comes openness. An unhappy person, ultimately, finds a lot of difficulties. Suffering is caused by ignorance."

It was the 77-year-old's third visit to Dunedin, after visiting in 1992 and 1996.

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"A lot of people are sceptical about religion. Religion can be spoiled due to lack of moral ethics," he said.

"As Buddhists, there are no absolutes. Everything is relative. We need constant effort to create harmony through mutual understanding.

"The Buddhism tradition is about cause and effect, cause and effect; not about a creator. Faith and reason must go together. Some people say Buddhism is not a religion which, in some ways, is true. Modern science is very important to learn from for Buddhists. Scepticism is very important. Just to accept is dangerous. Remain sceptical, investigate what is the reason, and then experiment."

He was also funny, treating his translator, Lotsawa Tenzin, as a comedic sidekick, teasing Dame Sukhi about her diamond rings and frequently punctuating his anecdotes with gales of boyish laughter.

He joked that his face had aged slowly "because I'm the Dalai Lama".

"Some people feel that I have special power and healing power. That is nonsense," he said, before revealing with a chuckle a spot on his head where he needed ointment to heal a skin complaint.

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However, he also delivered a warning.

"The gap between rich and poor is untenable and our present lifestyle is impossible. It is almost like suicide. So we have to take it very seriously," he said.

"I think world peace is much more realistic now. More people are talking than they were last century. I think the change is not because people are more holy, but because the last century became a century of fear, suffering and violence. I hope the 21st century will be a peaceful century."

The Dalai Lama leaves Dunedin this morning for the last public talk of his New Zealand visit, at the Civic Theatre in Auckland at 12.30pm today.