He said Labour had run out of ideas and had gotten "down and dirty".
Mr Key said he hadn't seen the ad but said he had learned quickly in politics that you have to laugh at yourself.
"I won't worry too much if Labour go on a nation-wide campaign trying to take the mickey out of me, so be it," Mr Key said.
The ad, aired last night, is the first time in New Zealand politics that true parody from either major party has made it on to our television screens, says Massey University's head of communications and design, Dr Claire Robinson.
Watch the ad:
National tried with 2005's "kind taxation" song, but where that was more humour, the Labour ad was "more Monty Python", she said.
Prime Minister Helen Clark said she hoped people saw the funny side of the advertisements.
"They're flip-flops and I think they're very humorous on commenting on flip-flops," the Prime Minister said.
When asked if the advertisement would be seen as a negative attack, she said the advertisements used Mr Key's own words.
The ad compares two John Keys. One, portrayed by a dignified photo, likes KiwiSaver. The other, illustrated by a goofy mugshot, wants to halve the scheme to pay for tax cuts.
The alternative, the ad says, is a trustworthy Helen Clark.
Dr Robinson said it was the sort of "attack commercial" common in American politics. If this were the US, the National Party would quickly respond.
She suggested a similar ad, contrasting the less gratifying photographs of Helen Clark with the "soft lighting" photographs on Labour's billboards, and asking: "Are you sure about who you trust?"
But she doubted National would do that. It was running a "safe" campaign and was likely to "rise above it", she said.
Not that Labour was out of line - the commercial was "absolutely fair game", Dr Robinson said.
But while it was going to get attention and impress Labour's faithful, it would probably do little to sway voters, she said.
If National did respond with a similar ad, the campaign would become riveting viewing.