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In the 1970s a “settlement” was reached in Australian federal government schools policy, largely in response to financial crises in Catholic systemic schools, and to promote equality of opportunity in all schools. Yet, after almost half a century, in important respects equality of opportunity has diminished. This diminution can be traced back to the contested settlement, and subsequent struggles involving powerful interest groups and conflicting political philosophies, and social dynamics involving the choices of individual families and movements in public opinion. I investigate this history, and some international comparisons, through policy debates, documents and decisions, and evidence from major data sources regarding trends according to school type in resourcing, enrolment shares, the socio-economic characteristics of students, and student outcomes.