My take is different to Marty's. His is reasonable, but I wouldn't do it.
When I was young, my parents moved very often - my siblings and I all went to more than one primary school per year of schooling. And several places where we lived were my parents' "forever" house. Somewhere, I have seen that people tend to move houses in Australia an average of every 5 years. If you look at how much it costs to buy and sell a house, even with the enormous capital gains that housing has been having, most people are just treading water, and not gaining anything because they move house too often.
If you are ABSOLUTELY SURE you are buying your forever house AND you haven't fallen in love with features that tenants will wreck (the box hedges in the garden?), Marty's idea is good. Remember, that when you buy a house, it has been done up and is beautifully presented for sale. When you get it back from tenants, they have lived in it, and haven't done it up to move out of it, so it will look worse no matter how wonderful they are.
The other thing is that when you are buying an investment property you are after something that will give you good returns. You are not necessarily after the same thing in a PPOR, so you might buy something that isn't easy to rent and therefore has very low rental return. When I first bought a house, I bought a wreck and fixed it up myself over the years (eventually I knocked down the skillion at the back and had an extension built to replace it). This was not a place I could or would rent out - any tenants would have had continuous problems with the kitchen and the bathroom, for example. I bought a lot cheaper than I would have otherwise, spent money on it whenever I had a windfall or had saved up enough. And I lived in it for a long time. This worked well for me as I learnt how to fix things, and I ended up with a wonderful house that I still miss, which was worth an enormous amount more when I sold it. But wouldn't have fit into Marty's idea.
So to me, waiting for 5 years is an excellent idea.
Happier is right that the best place to put a deposit is in the mortgage offset account, because the interest isn't taxed like every other investment (you're not getting interest - you're paying a loan).
But apart from that, I don't really know any good place to put it. Even high interest bank accounts aren't really very good. Term deposits used to be a lot better than high interest accounts, and I kept money in them when I was buying things - finding the sweet spot deposit whenever my money was about to mature. For instance, sometimes a 5 month deposit gave you better interest rates than 12 months, or any other length of time, so that was the sweet spot. But in this low interest economy, I think that term deposits aren't giving the value they used to. If you didn't want the money for 10 years you might go for insurance bonds or shares or other investments, but 5 years is a tricky time period. You might want to investigate if there are any managed funds around specifically for a short period - they used to be around, but I haven't heard about them for a while.
This is why I didn't respond to this when I first saw it - I just don't have the answers.