If Peter Jackson wants to make The Hobbit in New Zealand, then it will be made in New Zealand; if he doesn't then it won't. I think that's pretty much the bottom line, and all attempts to blame unions or claim it down to Warner Brothers is just public relations.
Jackson clearly wants to make the film. I don't believe that he is not in a position to make it where he wants. Jackson, after all, is the man who persuaded New Line Cinema - with the help of a
tax bribe from the then National government
(1) - to let him make the Lord Of The Rings trilogy in New Zealand. If he really wanted to, he could do the same again. he's one of the few directors out there who can make whatever demands he wants - and given that his previous insistence on making The Lord of the Rings in New Zealand paid off so handsomely, you'd think he'd be in a very strong position.
Possibly Warners have told him that New Zealand is not going to happen, because they think they can get a better tax deal elsewhere. If so, as a director, Jackson should be fighting to make the film his way, where he wants it, just like he did before. If Warners are uncooperative, Jackson should walk away.
That sounds drastic, but the box office arithmetic is on his side, and that's what matters. The Hobbit, without New Zealand is a pallid creature, an imposter. The Hobbit without New Zealand or Peter Jackson will start to look like a very doubtful proposition, especially given the problems the production has already had. I can't imagine Warner really looking at that prospect with much enthusiasm. How many millions for a film a lot of people will write off as a sham?
In the end, I think that Jackson doesn't want to make the film here, for mercurial reasons of his own. Whatever drove him to insist on making the Lord Of the Rings in New Zealand - and become a national icon - seems to have dissipated. Perhaps he's now so internationally established, New Zealand is just a small place where he used to make films, and if decides to favour them with another one, and they aren't grateful, the Hell with them. If they can make Ents and Orcs with CGI, then they can probably re-create New Zealand as well.
As a final thought, I've noticed a line of defence being used quite frequently, which is that Jackson always treats his crews well. I'm sure he does. But decent working conditions and respectful treatment aren't something to be dispensed at the whim of the director - its by agreements between professionals trying to realise a common goal. We don't live in a fantasy realm ruled by a magnanimous High King who decides to treat the peasants nicely - we just like making films about them. Perhaps that's another thing that Jackson has let slip.
As I said, if Jackson really wanted to make The Hobbit here, he'd make it happen, or he'd walk away. His quiescence suggests that he's already made up his mind to move it off shore. If he wanted to fight to keep it here, he'd have shown a lot more balls than he has. it might sound unkind, but perhaps Jackson has reneged - the Wingnut splatter merchant has become part of the Hollywood establishment.