Mr Dunne said: "I have a clear understanding with both Mr English and Mr Key that this is a matter that is on-ongoing."
He issued a discussion document on the proposal last year but there was not time to act on it for this year's Budget.
Asked if the Prime Minister saw the proposal as offering Mr Key some "wriggle-room" from his promise, Mr Dunne said "he does see wriggle-room. "
"What we now have to do is take the proposal to its next step and see if we can get broader political support for it."
Mr Dunne has been a support partner of National for the past two terms and of Labour before that, and has been a minister in governments led by Helen Clark and John Key.
Mr Key has encouraged National voters in Mr Dunne's Ohariu electorate to give their electorate vote to Mr Dunne.
Mr Dunne said he had an immense respect for both Helen Clark and Mr Key for different reasons.
To explain their different styles, he described how both would handle a hypothetical trip from Auckland to Wellington.
"Clark would be inclined to say 'I'd like you there by tomorrow afternoon. Now I want to know how you're going: are you going by bus? Are you going to get a train? Are you going to drive? Are you going to get a plane? If you are going to get a plane, what time will it be and when's it arriving?
"Key would say 'I want you there by 2.30 pm tomorrow afternoon and if you are not there, forget it, the deal's off.'"
He set his expectation, and if you didn't meet it, there would be consequences.
"Clark was, I think, in one sense more solicitous of one's welfare, and certainly, not over-bearing but over-caring in terms of how this was going to move, wanted to be informed every step of the way."
Mr Dunne resigned as a minister last year for failing to co-operate with an inquiry into the leaking of a report on the GCSB spy agency to a Fairfax journalist - and was later reinstated as a minister.
The GCSB report was commissioned following the revelation of unlawful spying by the GCSB on internet magnate Kim Dotcom, who is promising to reveal information on Mr Key with the journalist who broke the stories about former US intelligence contractor Edward Snowden.
Asked about Snowden, Mr Dunne said that on balance he had done the world a favour in shedding light on how the intelligence services operated.
"They have read too much John Le Carre."
Mr Dunne negotiated some moderations to the GCSB reform bill that passed last year and wanted to continue to keep an eye on any expansion of the agency's powers if returned to Parliament.
The Hot Seat interview with Peter Dunne was conducted on August 7, 2014.
The series so far:
Thursday - Hone Harawira and Laila Harre, Internet-Mana
Friday - Colin Craig, Conservatives
Saturday - Jamie Whyte, Act
Tomorrow - Te Ururoa Flavell, Maori Party