Actor Sam Neill says the dispute between the actors' unions and The Hobbit producers could be resolved with a simple cup of tea.

Australian union Media, Entertainment and Arts Alliance is unhappy makers of The Hobbit have refused to enter into a union-negotiated agreement and advised members not to accept work on the feature film.

Hollywood stars such as Sir Ian McKellen, Cate Blanchett and Hugo Weaving - all reportedly taking part in the Lord of the Rings prequel - supported a boycott, the union says.

But The Hobbit's executive producer, Sir Peter Jackson, has called the union an "Australian bully-boy", and has warned that the film could be made offshore.

Queenstown-based Neill, filming in Canada, told the Otago Daily Times yesterday "a cup of tea" should be enough to resolve the issues.

"I am dismayed to read how serious and how unnecessarily charged this dispute has become over the last few days," he said in an email.

"We are seeing too much anger and hysteria all round and it doesn't help to have lots of people yelling from the sideline.

"Both parties, it seems to me, need to sit down, take a deep breath, and begin talking and - more importantly - listening, in the friendly and co-operative way we do things in the New Zealand film industry.

"And we all need to remember that [Sir] Peter Jackson and his outfit and the actors of New Zealand have been very good for each other over the years.

"Unless they wish to calm the situation or indeed mediate, our politicians should absolutely be quiet. The last thing we need here is for the situation to be politicised.

"Everyone wants to see The Hobbit made, so the sooner we see calm and sweet reason return the better.

"This is not hard. Shaking hands and a cup of tea should do it."

Sir Peter has blasted the union for damaging the New Zealand film industry, warning that studio backers Warner Brothers were considering taking the movie offshore, possibly to Eastern Europe. He also said that the demands for collective bargaining by actors were illegal in New Zealand - a view backed by the Government which sought advice from Crown Law.

But president of the NZ Actors' Equity, Jennifer Ward-Lealand, has said there was no desire to jeopardise the production or see it move offshore.

Its wishes were "miniscule" and "entirely reasonable".

"Our members are simply seeking fair and equitable employment terms for New Zealand actors, in line with the terms and conditions that their colleagues elsewhere in the world enjoy.... Many have no cost implications for the production, and the overall impact of our demands is miniscule for a production of this size."

She believed a solution could be found if producers would sit down "calmly" with the union and discuss the issues.