He said the cover-up made it difficult to know the full extent of the abuse, but added that the number of cases had dropped significantly since the church started taking stronger action.
Cardinal George Pell, an advisor to Pope Francis on Vatican reforms, told a parliamentary hearing the church had been slow to address the suffering of victims and again issued an apology.
"I am fully apologetic, and absolutely sorry," he said in a tense hearing marked by at times angry questioning over the church's compensation and investigations.
Cardinal Pell was questioned for more than four hours.
He said the number of reports of abuse by clergy members peaked in the 1970s and 80s, but had fallen as the church changed its approach.
"The evidence of misbehaving, crimes, has been significantly reduced. I hope the worst is behind us," Cardinal Pell said, adding 300 people in Victoria had received compensation for abuse.
Child abuse scandals have haunted the church for more than two decades in Australia, Europe and the United States.
Cardinal Pell was giving evidence to a Victorian state inquiry in Melbourne, in relation to his role as Archbishop of Melbourne from 1996 to 2001, when he implemented protocols for dealing with abuse complaints.
Before a packed public gallery, Cardinal Pell issued another apology to the victims of sexual abuse, and said church leaders in the past had been reluctant to share information about accused priests.
"So I don't think many persons in the leadership of the Catholic church knew what a horrendous, widespread mess we were sitting on," he said.
But since the 1990s, the church was more open in dealing with the issue, and conducts stronger background checks on people joining the clergy, he said.
He also denied acting like "Pontius Pilate" in brushing aside claims and rejected accusations from MPs that his past references to the church being "bled to death" by abuse inquiries referred to concern about compensation payments.
"In my mind it was a secondary consideration, the financial consideration. Whatever the legislature decides is appropriate, we will pay," Cardinal Pell said.
The parliamentary inquiry has heard child abuse by members of the church was covered up, and that the Catholic church was more concerned with protecting priests than protecting victims.
It has been told that Cardinal Pell's predecessor as Archbishop of Melbourne, Frank Little, dealt with complaints confidentially, kept no records, and moved accused priests to new parishes where some continued to sexually abuse children.
Little died in 2008. But Cardinal Pell acknowledged Little covered up the issue and did not discuss it with advisers or other bishops.
"He inherited a situation where there were no protocols, no procedures. And he never spoke to anybody about it. He didn't know how to deal with it," Cardinal Pell said.
Cardinal Pell has also been criticised by victim support groups for his decision to accompany an accused paedophile priest into court in 1993, but said the action was not meant as a slight against abuse victims.
The priest, Gerald Ridsdale, was convicted and jailed for 19 years for molesting and raping 40 children between 1961 and 1987.
Cardinal Pell said he was aware of the "terrible crimes" and knew Ridsdale was going to plead guilty, and his decision to walk with him to court was not meant as a sign that he did not support the victims of his crimes.
Australian Prime Minister Julia Gillard has set up a rare Royal Commission, the highest form of investigation in Australia, into how churches, government bodies and other organisations dealt with child sex abuse cases.
Cardinal Pell has said the church would fully cooperate with the Royal Commission, which has yet to start hearing evidence and could run for several years.
The Catholic church is Australia's largest, with 5.4 million followers, representing about one in four Australians.