I've interpreted 'Legend' in two different ways.
Judith Wright was big on being in harmony with nature, so one way of looking at it is the need to be in harmony in nature, and the powerful force and strength that nature possesses. In the first few stanzas, you can see that the blacksmith's boy is out to 'conquer' nature, with his dog and gun, typical destructive implements. Blacksmith also has connotations with making weapons, and is also symbolic of the devil. You can also see nature fighting back with increasing ferocity through the first two stanzas.
However, in the third stanza, the elements of his own destructive human world are beginning to turn on him, and now nature, although powerful, will not destroy him and begins to protect him 'the grass lay down to pillow him' etc. as 'his rifle broke, his hat blew away and his dog was gone'. The rainbow that appears symbolises hope and invincibility offered by nature, and there is a change in him when 'he ran like a hare, he climbed like a fox' showing the elements of nature in him now. In the last stanza, his change in attitude is emphasised by 'hung the rainbow on his shoulder instead of his broken gun' and now 'lizards ran out to see, snakes made way for him'.
Another way to interpret it is that it depicts how one must face their problems. It begins with attempting to overcome them using brute force, or just trying to continue on with life without changing your thinking. The barriers imposed by your problems are depicted by nature. In the third stanza, when elements of his world begin to threaten him, it can be seen as needing to overcome your self-imposed barriers and changing your mindset in order to solve your problems. The rainbow symbolises the hope and promises of overcoming these problems, while the youth and innocence of the blacksmith's boy show that no matter your experience, age etc., anyone can overcome their problems