Mr Key refused to discuss the use of XKeyscore and whether the GCSB had access to it, but said the law did not allow GCSB to carry out mass surveillance.
He said there was no mass surveillance or data collection involved. "Yes there are databases that New Zealand intelligence agencies might be able to access, but the information that would be in that database would be for legitimate and legal reasons." He said it would only be if the person was a person of interest, such as fighting for rebels in a foreign country.
He said he had also checked overnight with the head of the GCSB Ian Fletcher and former head of the GCSB Bruce Ferguson and both had told him there were no NSA bases in New Zealand.
The Five Eyes parties had an agreement not to spy on each other.
Mr Key said NSA staff were sometimes in New Zealand on secondments, but there were no actual bases.
He defended his decision to release Cabinet papers setting out the so-called 'Speargun' protection, which would have allowed the GCSB to tap into the Southern Cross Cable to monitor cyber traffic to New Zealand. That was scrapped in the middle of last year and instead a more targeted programme was set in place - Cortex - over government departments and some critical companies which agreed to it.
Mr Key said he had not revealed the GCSB's work on Speargun at the time because he had already ruled it out before the issue of metadata and the GCSB's role in potentially unlawful spying on New Zealanders came up.
Labour Leader David Cunliffe said he wanted tomorrow night's final televised leaders' debate extended, partly as a result of the issues highlighted by last night's Moment of Truth event.
"It's the public's last opportunity before the election to see a one on one debate and there are some huge issues of national importance around at the moment, particularly around the governance of our security apparatus and I think the public has a right to hear that fully aired."
Commenting on the event he said: "I want to look past the circus to the substance. The substance is there are grave matters of the governance of national security which the Prime Minister must now address."
Mr Cunliffe said Labour had never been briefed on the XKeyscore system.
He had also asked former Labour leader David Shearer who had also served on Parliament's security and intelligence committee and Mr Shearer had confirmed he wasn't briefed on it either.
"I wouldn't be a surprise if there was a tool for the pooling of information across the agreement countries, what I've always said is this comes down to question of governance and the right legal frameworks around access."
One of the main questions Mr Key needed to answer was whether New Zealand provided information to that pool that came from the blanket surveillance of New Zealanders, Mr Cunliffe said.
However, the email which Kim Dotcom has offered as evidence that Mr Key lied about what he knew about him before the raid on his mansion was a matter between Dotcom and Mr Key, Mr Cunliffe said.
