Two $500 million (£315.63 million) Hobbit movies will be made in New Zealand as originally planned, Prime Minister John Key said after two days of crisis talks with Hollywood studio executives.
Senior 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 labour action was removed, production of the two movies 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 here. Hundreds of people marched in several cities to show their support for keeping production in New Zealand.
The Hobbit is JRR Tolkien's prequel to The Lord of the Rings.
Mr Key says the package includes an extra tax break of NZ$20 million (£9.43 million) for the studios, on top of $45 million (£28.38 million) already pledged by the government.
A labour law change will be put to Parliament on Thursday "to ensure New Zealand law in this area is settled to give producers like Warner Bros the confidence they need to produce their movies in New Zealand," he said.
The change - which applies only to the film industry - ensures actors and others will be hired as contract workers, a method often used by production companies, not as employees. The union had wanted local actors and other production workers to be hired as full-fledged employees on union contracts.
New Zealand will also contribute $7.5 million (£4.73 million ) to help with marketing costs of the two films.
"It's good to have the uncertainty (surrounding the movies) over and to have everyone now full steam ahead on producing these two movies," Mr Key told reporters after two days of intensive talks in the capital, Wellington.
