In Australia, a distinct political-educational imagination drives contemporary policy and praxis. This imagination finds root in the social governance models of British Third Way policy and can be considered social capitalist. Central to such politics is a view that social governance is capable of pursuing and achieving the social democratic ideals of equity and social justice, within the architecture of a globalising and competitive capitalist economy. In this paper, I analyse Australian federal and Victorian state education policies to argue that social capitalist politics has significant implications for the ways schools are being imagined and governed. Specifically, I argue that schools are re-imagined as 'learning communities' through which excellence and equity are seen to operate harmoniously amidst a marketising system of educational services. In doing so, I feature empirical data from an ethnographic project conducted in two socially disparate Victorian government secondary schools, to highlight myriad tensions and paradoxes that emerge when each school attempts to govern itself towards policy ideals. In conclusion, I argue that policy imaginations of schools as havens of excellence and equity are difficult to take seriously when infused into the architecture of an education system that is deeply stratified and structured to discriminate between individuals in line with performance hierarchies.