Prime Minister John Key says he is not "overly confident" the Hobbit will be made in New Zealand - but the decision will be made by the weekend.

Mr Key says the Government will consider bigger taxpayer-funded sweeteners to The Hobbit's makers but ruled out matching the bids of other nations vying to have the movies filmed in their countries.

After emerging from a two-hour meeting with Warner Brothers executives this evening, Mr Key confirmed industrial relations law changes and bigger financial incentives were the two issues under consideration by the studio as it weighed up whether to shoot the two Hobbit movies here or offshore.

There was no decision following the meeting today and meetings will continue through the night and tomorrow.

"If we could make the deal sweeter for them that would help; that's something we would consider… but we can't bridge the gap that is potentially on offer from other locations around the world. We're not prepared to do that and… I don't think the New Zealand taxpayer would want us to do that," Mr Key said.

Asked about the size of the gap between what New Zealand taxpayers were putting up and other governments were offering Mr Key answered: "It's not in the tens of millions, put it that way. There's a lot of noughts."

The meeting between Warner Bros and senior government ministers at Premier House in Wellington follows an increasingly emotional debate over the movies future in New Zealand after industrial action earlier threatened to derail the project.

Mr Key said the threat of further disruption remained Warner Bros major concern.

"They were very open and honest about the issues they're facing; there is a lot of goodwill toward New Zealand and they've made some very successful movies here in the past.

"But there is no question the industrial action has caused real concern… and they'll need resolution to some of those issues. It's also fair to say if it wasn't for the industrial action they were good to go."

The question the government now faced was whether it would be possible "to put the pieces back together again and get the movies signed off".

"The plan from here to address some of the issues will be to have some discussions internally; there will be some meetings tonight and tomorrow morning and I think we'll get a decision, whether it's yes or no, sometime this week."

The big issue for the studio was "certainty" and they did not trust the assurances of either the CTU, Actors Equity or the Australian-based actors union - which led the charge in the industrial action against The Hobbit - that there would be no further disruption.

"These are really big movies for Warner Brothers, the two Hobbit movies cost as much as the five major movies they are making in the United Kingdom at the moment. They need some certainty….and need to be sure they will be able to hit their deadlines and get these movies over the line."'

Labour law changes were a possibility and that was "one of the things the lawyers will go away and have a look at overnight".

The studio was respectful of the government's  position on bigger financial incentives, meanwhile.

BROWNLEE: NOTHING ON TABLE

Economic Development Minister Gerry Brownlee said the Government had no specific proposal to put to Warner Brothers executives at this afternoon's meeting.

"We are going to listen to what they have to put on the table, we can't pre-empt nor we can prevent what they might put on the table or ask for. We want to go to the meeting and have that discussion."

He said increasing the subsidy for the movies is "not on the table at the present time".

"The issue is certainty about being able to get the production complete and that's what we will be talking about today. If there are other issues no doubt they will tell us."

He said the Americans needed "surety about their capacity to complete this film in good time".

'THEY'RE NOT COMING HERE JUST TO SAY NO'

The Warner Bros executive is among a group of "West Coast heavy hitters" due to meet Mr Key and other government ministers today.

"It's a fairly heavy duty team that's actually come down to New Zealand and I think that's actually a good thing," Mr Key told Breakfast on TV One.

"If they were just coming to say 'no' then they wouldn't bother actually to send such a senior team."

The group includes the president of New Line Cinema, their chief legal counsel and a senior executive from Warner Bros head office who Mr Key said he knew "quite well".

He had phoned the executive at the weekend to sound him out ahead of today's meeting and came away believing it would be a "50/50 call" whether the movies were shot in New Zealand.

"They're not coming here just to say no per se. We've definitely got a chance of saving the movies but nor would I say to you it's a done deal on the back of the conversations I've had with them."

The Hobbit dispute has turned into an increasingly bitter row with the union movement after the involvement of Australian actors' union the Media, Entertainment and Arts Alliance (MEAA) in urging a worldwide actors' boycott against the movie.

Mr Key has accused the CTU of using The Hobbit to serve up a wish list and vehicle for a larger unionised workforce in New Zealand.

At the heart of the row is a dispute over whether actors can negotiate collectively. The actors' unions and CTU sought to negotiate minimum terms and conditions but the view of the Government and the movies' producers is that actors are on events-based contracts.

UNION ASSURANCES

Meanwhile, the Australian union boss who is accused of destabilising The Hobbit insisted today that Warner Bros and The Hobbit's producer, Sir Peter Jackson, had been given ''unconditional assurances'' that there would be no further disruption.

Mr Whipp led the boycott call against The Hobbit and has been slammed by Sir Peter for destabilising the Australian big budget movie industry and seeking to do the same here.

But Mr Whipp told Radio New Zealand he was only acting on the instructions of New Zealand actors.

''I have no particular interest in this whatsoever. Our interest is in doing what it is that those people working in the film industry want us to do. The performers have decided they want to join the union and want us to speak for them so that's what were doing.''

He disputed claims from the Jackson camp that the MEAA had brought the Australian movie industry to its knees and said conditions under which big budget movies filmed in Australia hadn't changed in 30 years.

- with ANDREA VANCE, KIRSTY JOHNSTON and NZPA