Key said he was "relaxed" about Labour and the Greens entering deals and said it was expected given the agreement.
He conceded it could have an impact on the chances of Dunne retaining his seat if the Greens did not stand a candidate.
"But if you don't run a candidate, our conventional wisdom is that it reduces your party vote. Because there is a bit of a link usually."
Although National has long urged its supporters in Epsom and Ohariu to vote for Act's David Seymour and Dunne in the past, it has always stood National candidates in those seats.
Little said he would not rule out "deals" which increased Labour's chances of getting into Government and the agreement with the Green Party allowed for it.
However, he said no specific arrangements had yet been made, beyond "very preliminary discussions".
He said the Greens had raised a number of electorates in which they were keen to grow their party vote and possibly win a seat.
"Equally I am committed to us, as we always have done, standing in seats. Having said that, I am not above electoral accommodations. I think the voters in New Zealand are mature and Labour supporters are mature enough to know if we want to change the government we are going to have to do things to enable us to change the government."
TROUBLE IN THE DEEP SOUTH?
There are also challenges mounting in other electorates - the Otago Daily Times has reported Simon Flood - a 52-year-old former Merrill Lynch investment fund manager plans to challenge incumbent Todd Barclay.
It is understood Flood was widely expected to get the selection in 2014 but pulled out at the last minute for family reasons.
Barclay's first term has been blemished by resignations of long-standing staff and reports of disputes. He said he had full support from his party electorate. "There's obviously a disaffected aspect of former staff members who aren't too comfortable with change. But I've worked hard over the last two years or so and we've got a lot to show for it."
Bill English, Barclay's predecessor in the seat, refused to endorse either, saying it was up to the party to select a candidate.
However, other colleagues expressed support on Twitter - including Police Minister Judith Collins who tweeted she was "looking forward to supporting @ToddBarclayMP ... in Dipton on Friday 4 Xmas" and Maggie Barry who tweeted she had spent time in the "Deep South" and "found him to be a very engaged, diligent and popular local MP".
Nicola Willis, a former adviser to Prime Minister John Key, is also challenging Paul Foster-Bell for selection in Wellington Central to try to topple Labour's Grant Robertson.
Meanwhile, National has selected former police officer Matt King as its candidate to try to win back the Northland electorate from NZ First leader Winston Peters.
Labour did a deal of sorts in the Northland byelection last year, signalling to voters to support Peters over its own candidate Willow Jean Prime.
Wannabe National candidates also had another seat opened for them by MP Chester Borrows' announcement he will leave politics in 2017.
THE MAORI SEATS
And Maori Party co-leader Marama Fox - a list MP - has ruled out trying to find an easier electorate to win than her home electorate of Ikaroa Rawhiti even if it means she does not return to Parliament.
Fox is the Maori Party's first List MP after the party won just one Maori electorate in 2014 - Te Ururoa Flavell's Waiariki. The party is in talks with Hone Harawira's Mana Party to try to win more electorates back from Labour, but that could mean Fox misses out on returning.
Fox said she would not stand in Tamaki Makaurau or any other electorate saying if she could not get support from her own people she did not deserve to be in Parliament
Green co-leader Metiria Turei has also told Labour she intends to stand in the Te Tai Tonga electorate which Labour's Rino Tirikatene held by 3554 votes last election.
She has assured them she will only campaign for the party vote and said she doubted it would result in a split vote which handed the seat back to the Maori Party.
Turei last stood in Te Tai Tonga in 2005 and got 2296 votes.
The Maori Party held the seat between 2005 and 2011 and Tirikatene won it by 1475 votes from the Maori Party's Rahui Katene.
