Mr Key said the deal with a Saudi businessman smoothed relations between New Zealand and the Gulf States which are discussing a trade deal.
Under the deal the government gave more than $11 million in cash, livestock and agricultural equipment to Saudi livestock importer Hamood Al-Khalaf, to appease him over New Zealand's ban on live sheep exports.
A report by the Auditor-General found no evidence of corruption, but heavily criticised government processes. It found no evidence of the government seeking legal advice on a claimed legal threat by the Saudi businessman.
Mr Key told Morning Report the issue was very serious and had led to a breakdown in the relationship.
"Without doing something there I don't think we would have advanced the Gulf States FTA. "
Saudi Arabia - one of the seven parties to the Gulf States free trade negotiations - had been opposed and were now moving towards the 'yes' camp.
"The relationship is back on a firmer footing," said Mr Key and a trade deal with the Gulf States was "getting pretty close".
"It's going to happen. That's the sign we see out of Riyadh."
New Zealand will get access to a very large market and would benefit from the agri-business hub developed in Saudi Arabia as part of the deal.
Asked whether he thought deal was a good use of money, he said he did.
"We did do something that was novel, I agree with that, something that was a bit unusual, but equally we do get an opportunity to promote New Zealand."