The Hobbit movies will be made in New Zealand after the government reached a deal with studio giant Warner Bros.

New Zealand prime minister John Key announced Wednesday that production of "The Hobbit" will stay in-country, local broadcast outlet TVNZ reports.

Agreement to keep the Peter Jackson-directed film in Kiwi country follows face-to-face negotiations between high-level local government officials and co-producer/distributor Warner Bros.

The deal includes introducing legislation to clarify the difference between independent contractors and employees in the film production industry in New Zealand.

The government has also offered Warner Bros bigger subsidies to make The Hobbit films in New Zealand. They will be directed by Peter Jackson.

Key said at a press conference that the government would move quickly to introduce legislation clarifying the distinction between independent contractors and employees as it related to the film production industry.

"It is this clarification that will guarantee the movies are made in New Zealand," he said.

He said industrial issues which had arisen in the past several weeks had highlighted concerns over the way in which the international film industry operated here.

Key said the Government had also moved to widen the qualifying criteria for the large budget screen production fund to improve New Zealand's competitiveness for big budget films.

That meant the two Hobbit movies, to be directed by Sir Peter Jackson, would get additional rebates of up to 7.5 million U.S. Dollars per picture, subject to their success.

Key also said New Zealand would host one of the world premieres of The Hobbit.

Source: Press Release