It's illegal to use an under-sized fish as bait.
For example, if you want to use a live trevally to try for a kingfish, it has to be longer than the legal take size for trevally.
I've seen new New Zealanders using under-sized snapper (about 10cm) as live baits off wharves. I remonstrated with one person until they (reluctantly) took the snapper off the hook and threw it back.
Check the size limits in your area. There are no limits for kahawai or mackerel.
Also, there are some restrictions on methods you may consider for catching bait. If you intend to use a net, check the regulations regarding mesh size for particular fish. For example, only a small number of species can be caught using a throw net (which has very small mesh size).
And check on regulations where you fish regarding taking of shellfish you may intend to use as bait - at certain times and in certain places, you can't just help yourself to cockles (for example) to use as bait.