I am sorry for this delayed reply to your gardening question. The spring rush has brought a deluge of questions and we are working hard to catch up!
The water will tend to attract mosquitos and will increase the rate of decay inside the trunk of the tree. I suggest you close off the hole with expandable foam such as is used around windows and doors. You can put something in the hole as a back wall so you don't have to use so much foam if you like. You can also paint the exterior of the foam to make it look more natural.
Thanks for the question. Best wishes for a wonderful gardening season. Please stop in again soon!
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