Matthew McConaughey and Foxy

The precise origins of the Blue Heeler are not known, but they appear to have been a distinct breed as early as 1897. It began when Smithfields were originally used in Australia for herding cattle. They were noisy and bit too hard, so they were bred with the Dingo, a wild dog prevalent in Australia. The resulting crosses were known as "Timmins Biters," which were quieter, but still bit hard.

A primitive stage of Collie unlike that of today's Border Collies and Smooth Collies, used for herding sheep, were then bred to the Dingo. In 1840, Thomas Hall bred a couple of Blue Smooth Highland Collies with dingoes and got the "Hall's Heeler." Then, in the 1870's Fred Davis bred some Bull Terrier into them to make the dogs more aggressive. These were relatively common as sporting and guard dogs in the late 19th and early 20th century.

The resulting Cattle Dog was of a slightly heavier and more muscular build than the Border Collie and of less temperamental nature, with good herding ability, the stamina to withstand extremes of temperature and the resourcefulness to forage and to feed itself on an omnivorous diet like a wild dog. Physically the Heeler has inherited a big broad head and strong jaws from the Bull Terrier. From the Dingo comes the distinctive sandy color of the legs and rather large pricked ears.

Like the Koolie, the Heeler is fearless with cattle and has a tendency to nip their heels to keep them moving when herding. This trait is undesirable when the dog applies it to humans and horses. It is rumoured that in order to create a breed that had a strong natural affiliation with horses, the Cattle Dog was crossed with the Dalmatian, which although not a working dog, was popular during the 19th and early 20th century as a carriage dog, running beside the horses. As a result of Dalmatian being introduced ACD pups are born all white and rarely some adult dogs will have floppy ears, although undesirable it is purely superficial and won't affect their abilities.
Src Wikipedia