Mr Key said he had accepted her assurances that it was a mistake.
"But she has had a very strong message from the party that as a result of making a mistake [she] is very unlikely to get a decent list ranking."
On Prime TV's Back Benches show last week, Ms Hauiti said about the spending: "Big boo-boo. Paid it back. Really sorry. There's no excuse for not knowing the Speaker's rules."
She had already been selected for the Kelston seat. On paper it is a safe Labour seat to be contested by former Labour MP Carmel Sepuloni and so Ms Hauiti would have been reliant on the list to be returned to Parliament.
She fell foul of the rules earlier this year by employing her civil union partner in her electorate office and said she didn't know the rules.
National president Peter Goodfellow said nominations for Kelston would open today for a week and the party board would make a decision in early August.
In 2011, she stood unsuccessfully in the Labour stronghold of Mangere and at No 63 on National's list, came into Parliament last May when National list MP Aaron Gilmore resigned.
New Zealand First leader Winston Peters called it a National Party "cover-up".
"She's standing down without any accountability from the National Party, the whips or the Prime Minister."
He said the National Party should reveal how much Ms Hauiti misspent.
"They throw allegations around at everyone else. When it comes to themselves, there's no accountability at all."