BSA chief executive Susan Freeman-Greene said the show would have had to explicitly or directly encourage or persuade listeners to vote for a particular party or person to fit the definition of an election programme and it did not do so.
"The BSA carefully considered the intent of the legislation, taking into account the fundamental right to freedom of expression, the severe monetary penalties if the Act is breached and that the term `election programme' generally relates to paid advertisements.
"It became clear to the authority that the legislation should be interpreted as overt or explicit encouragement or persuasion to vote in a particular way rather than incidentally or consequently amounting to encouragement or persuasion.''
The BSA ruling said it did not believe the "mere presence'' of the Prime Minister made the programme into an election programme.
"We can of course see that some political advantage will accrue to the Prime Minister and the party to which he belongs from exposures of this kind. It is not for us to say whether this should or should not be permitted; we are required to deal with the law as it stands.''
For the sake of completeness, the BSA also considered whether standards would have been breached if it had been an election programme.
"The Labour Party said a comment by a host that 'the Labour Party is furious that you (John Key) are on and they're not' was unfair and denigrated the party, but in our view this sort of banter is to be expected on a programme of this kind,'' said Ms Freeman-Greene.
The Labour Party also said it was unfair that leader Phil Goff was not allowed to host a similar programme but the BSA said there was no mandatory requirement for equal time.
Labour leader Phil Goff said he disagreed with the decision.
"The BSA did acknowledge political advantage would accrue to the Prime Minister from the programme, but did not breach the Act. Now I don't think any New Zealander is under any illusion other than that it would be politically advantageous to the Prime Minister if for no other reason than when we received the news of the double downgrade during the programme, he didn't have to answer any questions on it.''
The programme had given the Prime Minister a free hit where he could talk about his cat rather than uncomfortable economic issues.
"It was a one-hour free self-promotion for the Prime Minister. At the start of an election campaign you have to be fair to all political parties.''
Labour general secretary Chris Flatt said the party had not decided whether to appeal and were waiting for an Electoral Commission decision on the same issue.
He said the BSA had agreed Mr Key had gained some political advantage from exposure on the programme, but had ruled it was not technically an election programme.
"Its decision hangs on the definition of 'election programme.' We disagree with their view on that - it is a very narrow interpretation. So we are disappointing but we are still awaiting the decision of the Electoral Commission.''
The complaint was considered by BSA Chair Peter Radich, Mary Anne Shanahan and Te Raumawhitu Kupenga.
