Wellington, Oct 28 NZPA - There is widespread relief that production of The Hobbit movies will stay in New Zealand, but Prime Minister John Key is copping both praise and criticism for the concessions given to United States film studio Warner Bros.

Mr Key announced the agreement with Warner Bros last night, after two days of negotiations with studio executives who had been worried about industrial disputes and wanted a bigger tax break than the standard 15 percent for big movies to keep filming production here.

They got what they wanted with legislation due to be rushed through Parliament today aimed at clearing up confusion about the legal status of contractors and employees, along with a $13 million marketing subsidy and $20m tax break, said to be far short of what they argued for.

Mr Key said employment law changes were vital to ensure the $630m films stayed here as existing law could have led to costly delays through disputes and court cases. The change will cover only the movie industry.

The Australian-based Media, Entertainment and Arts Alliance (MEAA), and New Zealand Actors Equity (NZAE), which protested over terms and conditions before backing off and assuring producers there would be no industrial action during filming, restricted comments to welcoming the developments.

NZAE President Jennifer Ward-Lealand praised the Government's leadership in negotiating a positive outcome.

"These are films that should be made in New Zealand. We have the cast, we have the crew, we have the locations. We welcome the decision that the films will be made here in New Zealand," she said.

Ward-Lealand said the group would "take time now to reflect on the events of the past few weeks", and review them with members and colleagues.

MEAA executive Simon Whipp said: "We remain very positive about the progress already made in sitting down with the Screen Producers and Development Association to agree terms and conditions for New Zealand performers on all future screen productions here."

Council of Trade Unions (CTU) president Helen Kelly said no-one would resent The Hobbit films being made here, but the cost was "outrageous".

"That a foreign corporation can come into this country and demand that workers' rights in this industry be removed -- and that's effectively what's going to happen today under urgency," she told TVNZ's Breakfast programme.

She said unions had given an assurance to Warner Bros that there wouldn't be disruptions to filming, but that had been undermined by Mr Key, who was taking an opportunity to further erode worker rights.

Professor Nigel Haworth from the University of Auckland Business School said moving to change employment legislation was unusual.

"We've got a very sensible basis of labour law already in place. We have a very good regime for inviting foreign capital in, we are very open to that already. It's very unusual for a developed nation to go this far in order to make an investment attractive."

A spokesman for director Sir Peter Jackson said he was today in meetings with Warner Bros representatives and there would be no immediate comment on the decision to keep the films here.

Labour and the Greens said while they wanted the films shot here, there were concerns over the extent which the Government went to secure them.

The Greens said it was "unacceptable" to force legislation through Parliament for Warner Bros, and Labour MP Trevor Mallard said in Parliament that Mr Key had been "screwed" by the studio.

The legislation was unlikely to get support from either party, but had assured support from ACT and UnitedFuture.