REFILE-UPDATE 1-Bank of Canada says higher productivity needed

(Refiles to correct spelling to Ka Yan Ng in byline)

* Companies must boost productivity, export to new markets

* Progress needed on G20 reforms, or risks rise

* Banks have role in enhancing business productivity

* Strong C$ due to diverse factors

By Ka Yan Ng

TORONTO, March 29 (Reuters) - Canadian businesses must boost productivity and penetrate new export markets to compete in the vastly changed economic landscape after the global financial crisis, the Bank of Canada said on Monday.

But their job will be easier if Group of 20 industrialized and emerging nations follow through on promises to reform the financial system, cut budget deficits and avoid protectionism, Bank of Canada Senior Deputy Governor Paul Jenkins said in a speech to the Economic Club of Canada.

Jenkins is retiring from the bank this week and will be replaced by Tiff Macklem, currently Canada's G7 finance deputy.

"Our track record (on productivity) has not been impressive, even adjusting for the cyclical factors and uncertainties of the past 2-1/2 years," Jenkins said, echoing a speech made last week by Governor Mark Carney.

"With our trading partners, including the United States, continuing to invest and make strong gains in productivity growth, it is all the more imperative that firms in Canada make concerted efforts to boost productivity," he said.

Productivity is the measure of how much is produced per unit of labor and capital equipment.

There is little holding companies back from investing in the technology and innovation required to improve productivity, Jenkins said, pointing to strong profits and low taxes.

However, banks should lend more to small and mid-sized companies and Canada needs more sources of higher-risk capital, he said.

Another big challenge in the post-crisis world will be that major industrialized economies will have a lower potential to grow, likely expanding by no more than 2.5 percent a year, while emerging nations such as China, India and Brazil could grow by 5 to 8 percent.

That poses "tremendous opportunities" for Canadian exporters, who need to reduce reliance on the U.S. market.

PRESSURE ON G20

For the private sector to become the engine of growth, policy makers must restore confidence with credible plans for bringing public finances under control and keeping borders open to trade and investment.

Likewise, the stakes are high for the G20 members to agree to policy changes such as boosting the U.S. savings rate and allowing the Chinese yuan to appreciate more freely. Failure could lead to another crisis, Jenkins said.

"If you think about the G20, there are those four or five core elements that are making up that push by the G20 and we do need to absolutely make progress on those," he said.

"The longer it takes to put those in place, the greater the risks that you're talking about."

Jenkins made no reference to current Canadian monetary policy in his speech but when asked by reporters about the Bank of Canada's view on the strong Canadian dollar, he suggested the bank saw much of the appreciation as justified.

"Its movements reflect many different factors at play. On the one hand people point to commodity prices. On the other hand there have been comparisons made to movements in the Australian dollar," he said.

"As you well know, in running monetary policy, our focus is on inflation control. It's not to suggest we have a target value for the exchange rate." (Writing by Louise Egan; editing by Peter Galloway)