Just to confirm, yes, completely legal. I do it all the time travelling between the UK and Australia (except with a British passport and an Australian passport, rather than a New Zealand passport).

The key is to remember the purpose of each passport check:

• At check-in, the airline is interested to know that you have papers that will allow to enter your country of destination. (Show/enter details of your British passport.)
• The security check at Australian airports is designed to check that your boarding card and your passport bear the same name. (So either passport will do, but probably easiest to show your New Zealand passport here.)
• The Australian exit passport check is designed to make sure that you have not been in Australia illegally or in contravention of any visa. (Enter details of your New Zealand passport in the departure card, and shoe your New Zealand passport at passport control. You can now put your New Zealand passport away.)
• When you board the plane you'll almost certainly be asked to show your passport. (The airline again - show your British passport.)
• At any transit airport security check, show your British passport (the airline again).
• On arrival in the UK, show your British passport.