When installing a nest box, have a think about what will be at the base of a naturally formed tree hollow. Probably decayed wood, parrot gnawed wood fragments chewed from the inside of a tree hollow. Probably this bedding will be at least a few cm deep, and be quite soft and spongy. This is where a hollow nesting bird will lay her eggs, or a mammal will curl up and sleep.
This soft, spongy base of a tree hollow is very different to the hard wood base of a nest box. The hard base of a nest box by comparison, will result in eggs being cracked, for the many species of hollow nesting birds that don’t add their own bedding, and I would imagine, rather uncomfortable for a sleeping mammal such as a brushtail possum – that also doesn’t add its own bedding.
A nest box needs bedding added – you never know which species may wish to use it, the outside label is often not adhered to in a wilderness situation!
Some animals will furnish a tree hollow with their choice of nesting material, such as whole eucalypt leaves (Sugar Gliders), long strips of bark (Ringtail Possums), or make a little woven nest (White-Throated Tree Creeper). However other animals depend on bedding already within the hollow, or made from chewed wood from within the hollow.
To meet the needs of all nest box occupants, it is best to provide bedding in your nest boxes. Good options include (untreated) chipped wood and/or chipped bark (untreated), and wood shavings (untreated wood).
Straw and sugar cane mulch aren’t great options, as they provide great homes also for parasites (as many poultry breeders would know), and will quickly rot or go mouldy if not kept absolutely dry.
At least some (perhaps all, I’m not sure) parrot species do not carry the droppings of chicks from their nest. The deeper the nesting material you provide, the better any moisture from droppings is absorbed, making the nest box less gross as the excrement builds up inside.
It is a good idea to refresh nest box bedding once chicks have fledge if they are a nest-fouling species, so that the bedding is clean and parasite free for the next occupants. Such as for Crimson and Eastern Rosella nest boxes.
I remove egg shells, dead ducklings and unhatched rotten eggs from Wood Duck nest boxes, but leave any clean shavings and duck down for the next occupants.
For the tidy nesters like our Tree Creeper family, I leave the nest box completely alone. They do the nest tidying and sprucing up the following year. All droppings from chicks are removed immediately and dropped elsewhere so their nest stays really clean.
Some other helpful resources:
Build your own nest box: a guide for Western Sydney (Greater Sydney Local Land Services): https://www.wires.org.au/wildlife-info/wildlife-factsheets/Wildlife-Nest-Boxes-LLS.pdf
Nest Boxes for the Gippsland Region (East Gippsland & Maffra and District Landcare Networks): https://egln.org.au/wp-content/uploads/2013/07/Nest-box-booklet.pdf
Nest boxes for Natives (Birds Australia): http://birdlife.org.au/images/uploads/education_sheets/INFO-Nestboxes-nativebirds.pdf
Yellow Box Woodland Nest Box Project (Connecting Country): https://s3-ap-southeast-2.amazonaws.com/connectingcountry/press/wp-content/uploads/2018/01/03130248/NestboxFieldGuide_FINAL.pdf
Nest Box and Hollow Habitat Assessment Teacher Information Pack (Government of South Australia, NRM Education): http://www.naturalresources.sa.gov.au/files/faa91938-4acf-4877-a4a3-a27a00dc3a49/amlr-me-schools-terrestrial-birds-nest-boxes-hollows-habitat-ass-gen.pdf
Wildlife Notes, Nest Boxes For Wildlife (Land For Wildlife, WA): https://www.dpaw.wa.gov.au/images/documents/conservation-management/off-road-conservation/LFW/Nest_Boxes_for_Wildlife.pdf
Bush Futures Nest Boxes For Wildlife (Tweed-Byron Bush Futures Project): https://www.tweed.nsw.gov.au/Documents/Environment/Bush%20Futures/TSC01135_Nest_Box_Manual.pdf