Hobbit movies will stay in New Zealand

Two Hobbit films will be made in New Zealand as planned, Prime Minister John Key said today.

Warner Bros and New Line Cinema won an agreement for a change in labour law and bigger tax breaks to keep the project in the country after a dispute over actors' pay threw the £315 million production into turmoil.

The studios had threatened to move the prequels to The Lord of the Rings to another country.

New Zealand received a huge boost to its tourism and film industries after the trilogy was filmed there and hundreds have marched in several cities to show their support for keeping production in New Zealand.

"It's good to have the uncertainty over and to have everyone now full steam ahead," Mr Key said.