"Getting back into the habit of holding elections, to getting parliaments to work, those things are going to be a huge step in the right direction."
There would be some elements of Fiji's progress that would take more time "and we do understand that".
"No one is arguing that perfection will be achieved overnight."
The sanctions were imposed eight years ago as a form of protest against the coup led by military strongman Commodore Frank Bainimarama.
After seven years in his self-appointed role as Fiji Prime Minister, the former military commander stepped down a month ago in order to contest the election.
He announced at the weekend that his party would be called Fiji First.
Mr McCully said Commodore Bainimarama was free to travel to New Zealand "but I think it is unlikely he is going to divert himself from his campaign activities to spend a lot of time in New Zealand but that restriction is gone from today".
Relations have not been fully restored - neither New Zealand nor Australia has a high commissioner in place.
The elections will not be held in time for Fiji to be readmitted to the Pacific Islands Forum - the next summit is in July in Palau - but Mr McCully indicated Fiji would be readmitted straight after the elections.
Fiji has been cleared by Commonwealth ministers to take part in the Commonwealth Games in Glasgow in July and August.
New Zealand election specialists have been helping the Fiji Electoral Commission and Mr McCully said he hoped the fact that both countries' elections were so close would not affect that.
Travel sanctions are commonly used as a response to such things as coups or undemocratic actions.
Many countries, including New Zealand, have imposed travel sanctions against key Russian advisers and Crimean separatist leaders after Russia's fast-track annexation of Crimea from the Ukraine.