Commodore Frank Bainimarama announced an increase in the national deficit.
For 2013, the budget estimates total revenue of $2.1 billion Fiji dollars and a total expenditure of $2.3 billion.
That means the estimated net deficit for 2013 will be $218 million dollars or 2.8 per cent of Fiji's Gross Domestic Product a big increase on the current deficit of 1.9 per cent.
The interim prime minister said this was necessary in order to fix Fiji's roads.
Commodore Bainimarama insists the deficit increase is not reckless spending, but rather a focused and disciplined approach to building the nation's economic capacity.
And for reaction to the budget, we're joined by Peter Mazey, President of the Fiji Chamber of Commerce.
Speaker: Peter Mazey, President of the Fiji Chamber of Commerce
MAZEY: Well sort of surprised, it's a very, very good budget. It carries on from the budget we got last year, which reduced our taxes down to about 20 per cent. There's further tax cuts available for some sections. So yeah it's a very good budget across the board.
HILL: There was a big emphasis on improving the roads, in fact they're going to increase the budget deficit in order to, it looks like they're finally trying to really fix the roads. Is that something you think that the government should be focussing on, the roads?
MAZEY: Well I think it's very important that if you're going to increase your deficit that that deficit is going into capital expenditures, and it's not just going sort of to other projects. The capital expenditures are now going to be about 722-million in total. That's on capital, and our own ?? is going up substantially, and I think only today the government says they signed contracts with three companies to spend 422-million on our roads.
HILL: What effect would that have if they do fix the roads?
MAZEY: That's a huge effect for business.
HILL: Well how does improving the roads effect business? What will happen if they do manage to fix the roads, get pretty good roads, what will it do for business?
MAZEY: Well it means that we can move our products, it means that we don't need to establish factories in different areas of the country. It means we can setup new developments and new roads in the north and create more tourist destinations in areas for tourist development. And roads will help even our foreign investment and there's been changes in that as well, which is good.
HILL: You were talking about the changes to the tax policy last year which reduced a lot of taxes. Has that had the impact the people hoped, increased people's economic activity and got the economy moving again?
MAZEY: Well according to our members it has. The majority of members at the beginning of the year because it meant there was a big instance of money coming in, extra cash, and a lot of people spent that, so that moved around in the circulation and we were very happy with that from a business perspective. Going on government included benefits to businesses who wanted to improve or change their various equipment, whatever they wanted to do an upgrade there was going to be no duty on anything. That again has been included this year. So that in itself will help businesses. From a tax perspective, the 20 per cent tax rate last year was very good. Now they've put in place that if you register your company on the stock exchange the corporate tax will be reduced to 18-point-five per cent. One good thing for Australian companies, they can move their headquarters to Fiji now because the corporate tax rate will only be 17 per cent.
HILL: I can think of a lot of Australian companies that would see that as very attractive I suppose. Was there anything that wasn't in the budget that you would have liked to see? Was there any area that perhaps you think the Fiji government should concentrate on that it isn't concentrating on just at the moment?
MAZEY: Very hard, I think to find anything that wasn't in the budget, because for the first time ever there's a lot being done out of the social plight for the not so wealthy and things. They're now bringing in a pension for people over 70 who've never had a pension before, and there's about nine-thousand people in that sort of category. So they're certainly helping everybody across the board. So to say that we've found areas that we're unhappy with, not yet, I haven't been able to have a chance to go through the whole paper yet, but this is just from the notes given to us and what the minister. But the other thing across the board they gave us a five cent per unit electricity reduction for everybody, businesses and private.
HILL: Can the government afford this kind of spending? Is the government making enough money to really do this?
MAZEY: Well last year we thought we were going to have a budget surplus of about one-point-nine per cent deficit of GDP, and I asked the question today of customs officers, they're 200 million up on collection. So collection and taxes is actually going up, so that's what Europe's doing at the moment and charging more taxes to try and balance the books is the wrong thing to do. NYPG (?)'s gone, reduce taxes and you collect more.
HILL: Which a lot of people don't understand do they? They think lower taxes means less revenue, but in fact lower taxes, greater economic activity, more taxes off other areas?
MAZEY: Absolutely, well the other thing that's happened from the business perspective outside of the budget basically, which is making it good, is that the bank rates have gone way down, interest rates are now down to round about five per cent for corporates and between five and seven per cent for corporates and housing loans have gone down too. We've still got quite a substantial amount of surplus in the economy for the banks.
HILL: So would you say that as a result of this budget, also the previous budget as well which reduced the tax rates, that Fiji is on the right track?
MAZEY: Well we think so, I was talking to other businessmen today too, CEOs, and none of them can find fault. In the past people wanting foreigners wanting to invest in the country had to have a minimum of 250-thousand investment. That's been removed, they don't need it at all now. The government's giving more guarantees for small and micro enterprises so that the Reserve Bank will be working in projects with the other banks for lending to those new industries, new businesses. Infrastructure development of course means that the contracts signed today were all with Kiwi companies, so they're going to start working immediately and employing a lot of locals. So that sort of thing all helps.
HILL: Ok so it sounds like big thumbs up from the Chamber of Commerce to the budget today then?
MAZEY: The Chamber of Commerce was very impressed with it.