By Sam Dallas

It’s official: The Hobbit will finally be made – and it will be in New Zealand.

In a massive coup for both Kiwis and Australians, last night the New Zealand Government and Warner Bros closed a deal – after two days of negotiating – that will see the two-part movie be made in director Peter Jackson’s home country.

It was previously thought the film – a prequel to The Lord of the Rings, which put New Zealand on the map thanks to Jackson and his team –  could be taken to Europe.

As a result, mass protests and safety threats developed nation-wide.

A union boycott – which occurred after saying the movie's producers would not allow them to negotiatie a minimum wage and working conditions for their members – prompted Warner Bros executives to visit the country to review the studio's decision.

“I am delighted we have achieved this result,” New Zealand Prime Minister John Key said last night in a statement of the deal made.

“Making the two Hobbit movies here will not only safeguard work for thousands of New Zealanders, but it will also follow the success of The Lord Of The Rings trilogy in once again promoting New Zealand on the world stage.

“I’m very pleased that we have been able to ensure that the winning combination of Sir Peter Jackson, New Line, Warner Bros, MGM and New Zealand as a whole will have the opportunity to produce these movies together.”

The statement said the government would introduce legislation in Parliament today to “clarify the distinction between independent contractors and employees as it relates to the film production industry”.

“The industrial issues that have arisen in the past several weeks have highlighted a significant set of concerns for the way in which the international film industry operates,” Key said.

“We will be moving to ensure that New Zealand law in this area is settled to give film producers like Warner Bros the confidence they need to produce their movies in this country.”

It was confirmed the government had moved to widen the qualifying criteria for the Large Budget Screen Production Fund to improve the country’s competitiveness as a film destination for large budget films such as The Hobbit.

New Zealand will also host one of the world premieres of the films – which are based on the adventures of Bilbo Baggins.

“The impact of this will mean an additional rebate for The Hobbit movies of up to $US7.5 million per picture, subject to the success of those movies,” the statement said.

Earlier today, Jackson and wife Fran Walsh, of Wingnut Films, expressed their gratitude to the New Zealand government in a joint statement.

"We are grateful to the government for introducing legislation which shall give everyone in the film industry certainty as to their employment status," the statement said.

"This clarification will provide much needed stability and reassurance for film workers as well as investors from within New Zealand and overseas."

The government and Warner Bros have agreed to work together in a long-term strategic partnership to promote New Zealand as both a film production and tourism destination.

The government will offset $US10 million of Warner Bros’ marketing costs as part of the "strategic partnership".

“It’s good to have the uncertainty over, and to have everyone now full-steam ahead on this project,” Key said.

Filming for the $500 million project is expected to start in February next year with the first movie due for release in late 2012 and the second a year later.

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