The Australian newspaper reports Mr Dutton made the suggestion last year, but the proposal was rejected by Prime Minister Malcolm Turnbull and Treasurer Scott Morrison.
SBS News has contacted Mr Dutton's office for comment.
Australia's rate of permanent migration has been capped at 190,000 since 2011.
The number does not include temporary workers and students, but is made up of skilled work visas and family visas, with a smaller portion of humanitarian refugee visas.
