The pair were scheduled to both attend PIF in Port Moresby this week but Bainimarama is a no-show and Key said “it would have been nice” if he had turned up.
Key acknowledged it was Bainimarama's decision saying, “if he doesn't want to come he doesn't have to come”.
There are indications Bainimarama has been stirring up trouble by encouraging smaller Pacific states to thumb their noses at New Zealand and Australia this week.
Bainimarama has an issue with Australia and New Zealand's “undue influence” at PIF and has gone as far as to say Fiji won't attend PIF until the two countries are expelled.
He reportedly believes PIF no longer serves the best interests of Pacific Islanders.
Bainimarama has long taken issue with New Zealand and Australia's heavy stance in some areas, in particular their handling of Fiji being banned from PIF in 2009 after failing to return the country to democracy following the Bainimarama-led 2006 coup.
But Key disagrees there is a Fiji-led snub brewing and said while Bainimarama still has issues with the way Fiji was dealt with following the coup - the relationship between the two countries had been "fully restored".
“I think we took the right stance, it was something initiated by Prime Minister John Howard in Australia and Prime Minister Helen Clark in New Zealand and it was to say, and rightfully so, that people are entitled to democracy.
“When Governments are elected at a ballot box it's respected but we can't do that if it's at the barrel of a gun,” he said.
New Zealand had “honoured” its commitment to help fund elections in Fiji and “it's a matter for them now as to how much engagement they have,” Key said.
While Fiji appeared to take some issue with New Zealand and Australia - Key said relationships with other Pacific leaders were strong and many spoke “very fondly of New Zealand”.
“No country is more important or less important but Australia and New Zealand are significant funders and we have a special place for certain reasons, not least because Auckland is the largest Pacific city in the world,” Key said.