Letters from the Reserve Bank to some of the government's most senior ministers have shed light on this week's decision not to feature King Charles III on Australia's $5 note. 

The central bank announced on Thursday it will replace the monarch with a new design which "honours the culture and history of the First Australians".

Correspondence from Reserve Bank Governor Philip Lowe to lndigenous Australians Minister Linda Burney and Treasurer Jim Chalmers has been publicly released, as well as the response by Dr Chalmers.

In his letter to the treasurer, Dr Lowe asked if it was the government's view whether the monarch should continue to feature on the $5 note.

"The bank recognises that whether or not the monarch's portrait is on Australia's banknotes is of national significance," he wrote.

"Accordingly, I am seeking the Australian government's view on whether or not a portrait of King Charles lll should replace that of Queen Elizabeth ll."

In response, Dr Chalmers thanked Dr Lowe for the opportunity to provide the government's view.

"Of these two options presented by the bank, the government would be comfortable with a new design that honours the culture and history of First Australians, assuming a proper process for inclusive consultation is undertaken," the letter reads.

Directed to Ms Burney, Dr Lowe said the central bank's intention was to undergo an "inclusive consultation process" in deciding the new design.

"I am writing to seek your assistance and that of your office in determining how best we might undertake that consultation," he wrote.

The current $5 will continue to be issued until the new design is introduced and will remain legal tender.

The face of King Charles III is expected to be seen on Australian coins later this year.

AAP