"[But] in a second best world, where supply is not particularly responsive, policy might also look at whether there is scope to manage inflows of non-New Zealanders in a way that limits the contribution to cyclical demand pressures." the bank says.
It acknowledges that a policy of varying the inflow of immigrants in a counter-cyclical way would be challenging because of the lags involved.
And the advantages in terms of stabilising the cycle would have to be weighed against the potential disruption to longer-term goals of migration policy - the confusing signal it could send.
Precisely because of those lags, now is the right time to have this debate.
Right now immigration is not the problem, emigration is.
For the past five months there has been a net outflow of migrants.
For the year ended July the net inflow of migrants was just 2900, the smallest for 10 years and only a quarter of the average gain over the past 20 years.
Economists do not expect that to last, however, as the transtasman gap in economic growth and employment prospects narrows, at least in the short term.
There is also always the possibility of a geopolitical shock, like the 9/11 attacks on the United States 10 years ago, that encourages part of the large Kiwi diaspora to head for home.
On average over the past 10 years net immigration (including returning expatriates) has accounted for just over a third of the population increase; the rest is "natural increase" or births minus deaths.
However, that average masks a lot of volatility.
Immigration boosts both the demand and the supply sides of the economy, but the demand side first.
When demand outstrips supply, inflation pressures mount, driving up interest rates and the dollar.
In a paper to a macro-economic conference two months ago Michael Reddell laid many of the economy's ills at the door of migration policy.
Reddell is a senior economist at the Reserve Bank but this is one of those cases where the views expressed are the author's and not to be attributed to the institution he works for.
He notes that New Zealand has had one of the fastest rates of population growth in the OECD, notwithstanding the large numbers of Kiwis seeking greener pastures overseas.
Because people have to live somewhere, we had surges in residential investment as a share of GDP in the middle of the last decade, and to a lesser extent the mid-1990s, which were a lot higher than in the OECD as a whole.
Business investment, by contrast, has been around or below the OECD median since the late 1980s.
"But over that period we have had among the fastest rates of population growth, so we needed more investment as a per cent of GDP than the median OECD country just to maintain the capital stock per worker."
Reddell concludes that the rapid population growth rates successive governments chose to pursue look to have crowded out real business investment.
"With relatively low national savings rates and with a relatively well-educated and skilled domestic workforce, it isn't obvious that applying a lot more labour to the situation was the route to success in trying to reverse decades of relative economic decline."
One might go further and say it has let businesses off the hook, shielding them from the competitive discipline of having a common labour market with Australia.
By constantly topping up the labour supply it has perpetuated a low capital-to-labour ratio, low productivity and low incomes.
It has allowed business to pursue a policy of all hands to the pump, instead of investing in a more efficient pump.
On the narrower issue of the impact of immigration on house prices, the Department of Labour, in its submission to the inquiry, takes a more sanguine view.
At the national level there is a strong correlation between immigration and house prices.
But that does not demonstrate that the one causes the other.
It might be that conditions which encourage fewer people to leave the country, thus boosting the net migration gain, are conditions which are also independently positive for the housing market.
The Labour Department cites research by David Mare and Steven Stillman of the Wellington think tank Motu who looked at the relationships between migration, population and house prices at a local level.
They found that between 1991 and 2006 population growth and house prices were only weakly associated.
"For example a 1 per cent increase in an area's population was associated with a 0.2 to 0.5 per cent increase in house prices. The impact on rents was found to be even lower, around 0.2 per cent."
The researchers then looked at the source of population growth in a region - new migrants, internal migration from elsewhere in New Zealand, returning expatriates or the existing population.
"Although immigration flows were an important contributor to population change, no evidence was found that the inflow of immigrants had an impact on house prices," the Labour Department said.
"Local house price increases were more associated with the location that New Zealanders returning from abroad settled in than where new migrants lived."
So while there is a correlation between immigration and house prices at the national level, finer-grained analysis found a much weaker relationship.
"Further, when the composition of the inflows was disaggregated the impact of an inflow of overseas born to an area was negligible."
Given that immigration policy can only control how open the country is to foreign-born immigrants, not the comings and goings of New Zealanders, that suggests the Reserve Bank's call for a counter-cyclical approach is likely to fall on deaf ears.
