Despite the increase, he said the Budget would still show the Government was on track to a surplus in 2014/15.
Mr Key said the rebuild was the largest and most complex single project in New Zealand history, Mr Key said.
"That always meant that it would be difficult to get an exact handle on the total estimated cost straight away."
"The estimate increases are due in many cases to more precise information becoming available about what the actual costs are across a range of areas, from housing and social investment to infrastructure and commercial development.
"These estimates will continue to be updated from time to time, but they do not change the Government's commitment to Christchurch and Canterbury.
"We will do what it takes to rebuild our second largest city, and that commitment will be unwavering."
Mr Key said considerable progress was being made on the rebuild.
He noted that while the rebuild will be largely built by private sector capital, the Government will put money into delivering core public facilities and services.
"We want to focus taxpayers' money in social assets rather than putting that money into competition with private sector players.
"All this demonstrates our commitment to the people of Christchurch, and Canterbury," Mr Key said.
Christchurch mayor Bob Parker said the positive side of the cost upgrade was the level of private sector investment in Christchurch.
"It's a good sign, it shows that people are ready to reinvest and there are a lot of opportunities for investment here," he said.
He said between 80 to 90 per cent of the costs of the rebuild would fall on the private sector, and while a large amount would be funded by insurance, there was also new investment coming into the region.
"We know that some of the insurance money has left the city, we're not surprised by that, but we equally see new investment coming in.
"If you come to Christchurch and invest in something like an accommodation project we can say you would get something in the order of 10 per cent on that investment at the moment, and we can substantiate that."
Mr Parker said the council's costs were estimated at about $2 billion, and while he expected the odd area to see an increase, "we're very confident we've built in the flexibility in our financial arrangements to cope with that."
He said there was some room for movement in infrastructure costs, but the estimates were now much more accurate because checks had now been completed across the city.
"From the point of view of the horizontal infrastructure, roads and pipes, I think we're fairly close to having an accurate figure around that."
