New Zealand law change means 'Hobbit' goes ahead

Two "hobbit" films will be made in New Zealand as originally planned, John Key, the country's Prime Minister, said yesterday.

His announcement followed two days of crisis talks with Hollywood studio executives over the fate of the $500m films.

Executives from Warner Bros and New Line Cinema won an agreement for a change in labour law and bigger tax breaks to keep the project in New Zealand after a dispute over pay and conditions for actors threw the production into turmoil last week.

The studios had warned that unless the threat of industrial action was removed, production of the two films would be moved to another country.

The dispute became a national issue in New Zealand, which received a huge boost to its tourism and film-making industries after The Lord of the Rings trilogy was made there.