"I made the judgment it was time for fresh energy and ideas and it was timely for other members of what is a talented caucus of 59 to be given an opportunity," Mr Key said.
Mr Heatley said he hadn't given any thought at this stage to any possible return to cabinet, as his colleague Nick Smith has done.
"I've always been MP for Whangarei and that's my first priority. This will allow me to have more time in my electorate working for Whangarei."
Some locals criticised Mr Heatley for being absent from his electorate, but the MP said one of the down sides of being a minister was that he had to focus on national issues and didn't get to spend as much time on electorate issues.
"But I still returned home once a week and will now be able to spend more time in Whangarei," he said.
Mr Heatley said he felt he had done a good job at his portfolios in his four years as a minister so the demotion came as a surprise. He said he was keen to continue as Whangarei MP and was would stand for the party in the next election if wanted.
Mr Heatley stood down from his ministerial posts in 2010 before returning 34 days later after being cleared of any intentional wrongdoing over the misuse of his ministerial credit card. He had signed an expense claim for a dinner when, in fact, the $70 charge was for bottles of wine at a National Party function.