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Arid, largely treeless areas aside, most Australian bushland is sclerophyll forest. The word comes from a Greek term and means "hard-leaved". Sclerophyllous plants occur in all parts of the world but are most typical of Australia; they have hard leaves and short internodes (the distance between leaves along the stem). Examples include the Proteaceae (grevilleas, banksias and proteas), tea-trees, acacias, boronias, and the eucalypts.

Most of the wooded parts of present-day Australia have become sclerophyll forest as a result of the extreme age of the continent. (Although human intervention has been significant also.) Deep weathering of the crust over many millions of years leached chemicals out of the rock, leaving Australian soils deficient in nutrients, particularly phosphorous. (Small areas, mostly in the south, have benefited from relatively recent volcanic activity and have fairly rich soils as a result.) Although sclerophyllous plants generally resist dry conditions well, in Australia they evolved in response to the low level of phosorous in the soil—indeed, many Australian native plants cannot tolerate higher levels of phosporous and will die if fertilised incorrectly.

The less extensive wet sclerophyll forests have a tall eucalyptus overstory, 30 metres or more (typically Mountain Ash, Alpine Ash, Messmate Stringybark or Manna Gum), and have a soft-leaved, fairly open understorey (tree ferns are common), and require ample rainfall—1000mm (40 inches) or more.

The ubiquitous dry sclerophyll forests covered vast areas (and to a much lesser extent still do); have a shorter eucalyptus overstory (10 to 30 metres); and the understorey is also hard-leaved. Often seeming drab and barren to the casual European eye, dry sclerophyll forest is highly complex and diverse, with up to twice as many different plant species per square metre as rainforest, and high animal diversity too. (If at first this seems counter-intuitive, remember that, as a broad generalisation, harsher conditions promote speciation and diversity, with every tiny variation in soil, light, or moisture offering a niche, where rich soils and ample water tend to simply favour species which can take advantage of them most rapidly.)

Sclerophyllous plants are anything but newcomers—the Proteaceae family dates back 80 million years to the late Cretaceous—but sclerophyll forests did not start becoming a major part of the landscape until around 15 million years ago. By the time of European settlement, sclerophyll forest accounted for the vast bulk of the forested areas.