Seeing that Peter Jackson shot Bad Taste with his friends on weekends (and on a shoestring budget), not a lot of precautions were taken, resulting in many onset injuries. In this scene, Jackson (forced to play two characters who fight eachother here, after many of his actors left or weren't available) was simply tied to a rope. But there's also some clever camera work involved: the side of the hill they were shooting on was grassy and not as life-threatening as it looks. Here's a detailed account from Peter Jackson: From Prince of Splatter to Lord of the Rings:
The hilltop in question is just a short walk up through the bush from Pukerua Bay township [...] Looking down from the top, there is plenty of grass, scrub and the occasional wire fence as the hillside drops away to the ocean. It is easy to imagine that a fall would not be the end of the world, but judging by the sheer length of the journey, you wouldn't want to find out. Jackson tied a rope to himself, the other end to a nearby stump, and dangled himself above the drop. The person filming him often had no rope at all.