The new bank notes will be printed at a cost of $US300 million.
The Australian Securities and Investments Commission (ASIC) says the new notes will cost less to produce, with the bank issuing the notes using standard paper.
The $US500 note is currently being issued in denominations of $100, $20, $10, $5 and $1,000.
The $US100 note will be a $US20 denomination.
Australian banks will not be required to print the new banknotes, with existing banknotes being backed by the ABS and the Reserve Bank of Australia.
The banknotes will also have a new design, which will be produced by a company called NFU.NFU will produce the banknotes at its Sydney factory, which is currently under construction.
The new notes are due to arrive in September and have a face value of $AU1,200.
New notes will also include an embedded microchip that will allow the bank to make payments from any mobile phone, including in the UK, the US, Japan and Canada.
The Australian Banking Association (ABSA) says that it expects the banknote to be a hit among consumers, especially as consumers who have no choice about paying cash with credit cards are likely to want to use the new note.
“It’s going to be the most attractive note to use as it’s a little cheaper, which means it will appeal to people who would otherwise not have been able to use a credit card,” ABSA president Nick Deane said.
“It also has a little more design that we think is going to appeal to consumers who like the feel of a credit chip and are more likely to like a banknote.”
The Australian dollar has dropped by around 0.2 per cent against the Australian dollar over the past 24 hours, as investors have priced in a weaker dollar.
There are currently no plans for a bank to issue the Australian banknotes.