THE troubled big budget production of The Hobbit will finally start filming today, the New Zealand Herald reported.

After months of wrangling, delays, financial woes and health problems for Oscar-winning director Peter Jackson, the two-film 3D project will start filming at Wellington's Stone Street Studios, one of two confirmed locations.

Work at the second location - the site of the imaginary Hobbiton near the North Island town of Matamata - has reportedly been delayed until the southern hemisphere summer.

The $500 million prequel to The Lord of the Rings has been dogged by problems, including a union threat to boycott the movie.

The studio agreed to keep filming in New Zealand after the government changed employment laws and granted the studio millions of dollars in tax breaks.

Even before the industrial dispute, the project was stalled by fights about distribution rights, budget blowouts and the financial woes of the MGM studio.

It was further delayed when Jackson was rushed to the hospital complaining of stomach pains and underwent surgery for a perforated ulcer, however his return to health and resolution of the other issues has allowed the project to get underway.

Confirmed cast members for The Hobbit include Martin Freeman as Bilbo Baggins, Elijah Wood as Frodo and Sir Ian McKellen as Gandalf.

McKellen blogged about his return to rehearsals last week, describing the project as being "as close to bliss as an actor can get".

The first installment of The Hobbit is expected in December 2012, while the second will be released in 2013.

Originally published as The Hobbit finally calls 'action'