The news only gets better for those stockpiling cash. McCarthy pointed out that not all short term investments were covered, and that excluded providers like foreign banks and cash management trusts would have to offer even higher rates to attract depositors. National Australia Bank obviously thinks the guarantee will lure more wholesale investors into cash. It has traditionally borrowed from institutions (NCDs), but as these instruments are not covered by the guarantee, the bank recently established its first-ever institutional term deposit facility.

It’s a lure best avoided, thinks Australian Unity chief investment officer David Bryant, one of many who believes those currently overweight cash will live to regret it. “Not sticking to your long term asset allocation can bring irreparable harm to your returns. Nobody can pick the bottom. If you’ve been stockpiling cash and are trying to get back in during a volatile market, chances are that you’ll make the decision on the 4 per cent up day but have it implemented on the 5 per cent down day. This is no time to be diverging from your long-term strategy,” he says.

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