New Zealand Prime Minister John Key and Avatar director James Cameron announced on Monday that the next three Avatar films would be made in New Zealand.

Mr. Key said the government had signed a memorandum of understanding with Lightstorm Entertainment and Twentieth Century Fox Film Corporation to make the movies in New Zealand.

The deal will see the companies spend more than 500 million New Zealand dollars on local production, including filming most of the live action and doing the visual effects in New Zealand.

Mr. Key also announced an increase in tax incentives for the film industry, boosting the baseline rebate from 15 per cent to 20 per cent and offering an additional five per cent for productions, which offered special benefits to New Zealand.

The Avatar sequels are expected to be released in Christmas 2016, 2017 and 2018.