New Zealand's government has suspended NZ$25m (US$17m, €14.5m, £12.3m) financing for a convention centre in Wellington, New Zealand, with the plans on hold until Sir Peter Jackson can reach an agreement with the city over his proposed movie museum project.

The country's government had agreed the financial package to help pay for the NZ$165m (US$111.6m, €96m, £85.6m) development, which would also feature Jackson's museum, however, the Ministry of Business, Innovation and Employment (MBIE) has now put the request on hold.

The much-hyped museum project – which would be home to a collection of movie memorabilia synonymous with Wellington’s film-making industry – is currently in limbo, with Jackson continuing to lock horns with the Wellington City Council over the project.

The development was initially approved in 2016, however, progress stalled, with Jackson – who will be investing millions of dollars in the project – raising concerns over the council's decision not to put the design contract out for tender. Jackson also said in an open letter, that the council seemed "intent on reneging on many of the terms already agreed in the November 2015 signed contract," which he said was the "principal cause of the ongoing delays".

According to Robyn Henderson, MBIE sectors policy manager, the ministry had started a process of assessing the financial agreement. That assessment is now on hold pending an agreement between Jackson and the city.

"Any proposed Government funding would be for the convention centre only," said council spokesperson, Richard MacLean, speaking to Stuff. "We'd discuss this with the government only after we have progressed plans and designs."

The initial agreement between Jackson and the council says that the council would finance the new building's development, while Jackson's The Movie Museum Limited (TMML) would fund the museum fit-out. Part of the disagreement is over the fit-out costs with the council reportedly now expected to cover 90 per cent of the overall cost.

"There are a lot of major projects we know Wellingtonians are eager to see delivered," said city mayor, Justin Lester in an update on the project in April.

"We are working hard in the background to make sure the Movie Museum and Convention Centre comes to fruition."

According to the council, the project is expected to boost the regeneration of Wellington, generate significant additional visitor expenditure, cement the city’s image as the film capital of New Zealand and improve livability. The museum was originally scheduled to open this year. A deadline has been set for both parties to reach an agreement on the stalled project. If Jackson withdraws his interest, alternative uses for the museum and convention centre site are being considered, according to reports.