The koala is found in coastal regions of eastern and southern Australia, from Adelaide to the southern part of Cape York Peninsula. Populations also extend for considerable distances inland in regions with enough moisture to support suitable woodlands. The koalas of South Australia were largely exterminated during the early part of the 20th century, but the state has since been repopulated with Victorian stock. The koala is not found in Tasmania, the Northern Territory or Western Australia. As of 2012 there have been increasing concerns about the animal's sustainable future in the environment.
A baby koala is referred to as a joey and is hairless, blind, and earless. At birth the joey, only 20 mm (0.79 in) long, crawls into the downward-facing pouch on the mother's belly (which is closed by a drawstring-like muscle that the mother can tighten at will) and attaches itself to one of the two teats.

Young remain hidden in the pouch for about six months, feeding on only milk. During this time they grow ears, eyes, and fur. The joey then begins to explore outside of the pouch. At about this stage it begins to consume small quantities of the mother’s "pap" (formerly thought to be excrement, but now thought to come from the mother's cecum) in order to inoculate its gut with the microbes necessary to digest eucalypt leaves. The joey will remain with its mother for another six months or so, riding on her back, and feeding on both milk and eucalypt leaves until weaning is complete at about 12 months of age. Young females disperse to nearby areas at that time; young males often stay in the mother's home range until they are two or three years old.

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