Our capital city's enthusiastic adoption of the moniker Wellywood may have seemed a bit crass and derivative to the rest of the country - which managed to talk the city out of displaying its provincialism to visitors with the word writ large on the hills overlooking the airport - but our investigation today of movie subsidies shows the title would not be out of place.

Sir Peter Jackson's production base in Miramar appears to be one of the big players in international movie making competing with Hollywood itself. It would make a glittering case for the value of public subsidies and other supports for industry were it not for the fact that it has been subsidised for decades and its dependence on public money has not diminished. In fact it is growing.

Nippert reports the cost to the New Zealand taxpayers has doubled in the last decade, from 12.5 to 25 per cent of production costs. About two thirds comes back to the Government in tax from activities related to the productions. To argue the public investment generates a financial return for the taxpayer, all sorts of spin-off benefits through tourism and technology have to be calculated.

The latest attempt to do that, by an economic consultancy, Sapere Group, reckons those benefits "significantly outweigh" the cost of grants. But the Government has just released its report with two reviews of it by consultants who say the evidence for that conclusion is weak and slight changes in its underlying assumptions would show film subsidies were retarding the economy. In other words, the money would be better used for a genuinely profitable purpose.


The film industry is just about the only commercial sector in this country that was allowed to continue to receive public subsidies after 1984 when all other investment was exposed to the test of value in international markets. The local film industry's case for continued subsidies has always been based on the fact that its international competitors are subsidised too. But that is an argument our farmers could have made in 1984 and every year since.

So how has the film industry managed to remain an exception to the fundamental rule of a market economy? The question is especially difficult to answer because the subsidies go to foreign, mostly American, film studios to lure their productions here. As Jackson says, "not a cent" of public money goes directly into his business. Without offering those incentives, he says, we would not have a film industry.

The lengths our governments have gone to to attract work for Wellywood were starkly illustrated when National changed industrial law to accommodate Warner Brothers, an act which has not endeared Labour to the incentives. Economic Development Minister David Parker tells us today the new Government is contemplating a cap on the amounts it will pay to bring productions here and it might alter National's "Hobbit law" to give actors more security.

It is hard to measure the value of the Lord of the Rings trilogy to New Zealand, because it has become part of our folklore as well as a tourist attraction.

Weta Workshop and associated entities are a source point of artistic and technological pride. But the economic benefits may be as illusory as everything they create.