'The Hobbit' was almost filmed in Britain

Jackson, who will host the world premiere of the first instalment of his trilogy in Wellington on Wednesday, said studio executives went as far as scouting locations in Scotland and England when the row erupted in late 2010.

The Oscar-winning director feared not being able to use the rugged New Zealand backdrops that were an integral part of his first Tolkien project, the blockbuster "The Lord of the Rings" trilogy.

"The Hobbit came very close to not being filmed here," he told Radio New Zealand.

"The worst time for me was when a huge box arrived in the office... this large cardboard box arrived and they had sent a location scout around England and Scotland to take photographs.

"They literally had the Hobbit script broken down into scenes, and in each scene there were pictures of the Scottish Highlands and England and this and that, to convince us we could easily go over there to shoot the film."

In the event, the dispute was settled when New Zealand's conservative government amended labour laws to minimise union representation on set, also offering financial incentives to keep the production in the country.

"It was not the happiest time for anyone," Jackson said.

As part of the deal reached with the government, the New Zealand tourism industry is using the trilogy to try to revive flagging visitor numbers, promoting the country as "100 percent Middle Earth" in a worldwide campaign.

The hype will reach a crescendo Wednesday when up to 100,000 people are expected to line the streets of Wellington for the premiere of "The Hobbit: An Unexpected Journey".

Jackson also defended his decision to shoot "The Hobbit" at a groundbreaking 48 frames a second, rather than the standard 24, a move that drew mixed critical reactions when a preview was screened in Las Vegas in April.

Countering criticism that the footage was too clear and lacked warmth, Jackson said it offered a "more immersive" experience for movie-goers that eliminated the blur and "stagger" seen at 24 frames a second.

He likened the higher shooting rate to the introduction of compact discs, saying it was the way of the future for film.

"I personally think it's fantastic, but it's different," he said.

"I remember when CDs came in and there was a nostalgic feeling that the sound of a needle on vinyl was what music should sound like -- suddenly you've got this pristine clarity and a lot of people were nay-saying it."

The first "Hobbit" movie will be released globally in December.